Losing by Winning: Campbell-Ewald v. Gomez

The Supreme Court heard argument yesterday in Campbell-Ewald v. Gomez.  The question  is whether defendants in class action litigation can make the case moot by offering the plaintiff class representatives cash for all damages they could possibly win in court.  Defendants' argued that because they've made the offer for full compensation, plaintiffs have nothing at stake in the litigation (the case is "moot") even though they reject the offer.  The Constitution in Article III limits the power of the judicial branch to deciding "cases or controversies."  Issues where the litigants have no stake in the outcome of the proceeding are neither.

The class action litigation for which Gomez is the plaintiff class representative involved alleged violation of the Telephone Consumer Protection Act.  Gomez, claims that he and 100,000 other people received text messages from one of the defendants in violation of the Act.  The Act provides damages to consumers of $500 per violation. The defendants offered to pay Gomez triple the $500 for each text he received.  That's just not good enough for Gomez's lawyers who want a right to pursue damages plus attorneys fees on behalf of the plaintiff class.  The defendants raised the mootness issue all the way to the Ninth Circuit, which held that Gomez still had the requisite stake in the case.

Based on their questions, the justices understand the significance of this case to the plaintiffs-side class action bar. Justice Sotomayor made her view clear-- the plaintiffs are entitled to their day in court and their lawyers are entitled to class certification and fees.  She quipped to counsel for defendants:  "What's an Article III determination is whether [the plaintiff] is entitled to the relief that they asked for.  May well be they're not. But they are entitled to have the Court say it, not you." Justice Breyer asked counsel for the plaintiff class why the defendant couldn't just tender cash to the court and let the court distribute the cash to people who received the improper text messages.  Plaintiffs' counsel answered that even then the case would not be moot because the plaintiff would not have a judgment.  Breyer's response was not sympathetic-- "Give him a judgment-- who cares?"  Obviously, it's the lawyer who wants the  class certified who cares.  His chance for attorneys fees, typically calculated as a percentage of the settlement, is all that is at stake.  Justice Roberts nailed it:  "Oh well, that's the whole thing, right? This is all about class certification."

Here's Ronald Mann's fascinating roundup of the argument on this issue on Scotusblog.   Mann thinks that key voters Breyer and Kennedy might favor a middle ground position which would recognize a way for a defendant to moot a class action case (and save attorneys fees) by conceding liability and paying full damages in cash into the court.  But he's not predicting how the Court will rule.

A side note on the Telephone Consumer Protection Act:  In August 2014,Capital One and three collection agencies agreed to pay $75.5 million to settle and end a class action alleging that the companies used an automated dialer to call consumer's cell phones without their consent in violation of the Act.  The proposed agreement would pay about $20-40 per class member (about 21 million people).  The class consisted of all people who received an automatic dialer call to collect credit card debt between January 2008 and June 2014.  About 30% of the fund, $22.5 million, went to the attorneys for the class.  After the Capital One case settled, the FTC enacted new rules which now require an for-profit business to acquire "prior express written consent" before making any call or text using autodialers or prerecorded voices to cellphones.