Class Actions Survive Pick-Off Challenge and the Supreme Courts

Mon Feb 08, 2016



In October we wrote about a very interesting case before the Supreme Court, Campbell-Ewald Co. v Gomez. Jose Gomez received an unsolicited text message advertising the US Navy. The sender of the text was a government contractor, a company called Campbell-Ewald, and the text violated the Telephone Consumer Protection Act. Gomez claimed $500 in damages and the case soon became a class action. Campbell-Ewald made Gomez a very tricky offer. "Instead of $500, would you take $1500 to settle the case?" The defense attorneys argued that since that would triple his claim, he could not reasonably refuse the offer.

Campbell-Ewald’s argument is a true brain-teaser. They further argued that if Gomez accepts the offer, then the acceptance must end the suit and end the class action. But if he rejects the offer, that also ends the suit because his rejection was unreasonable and thus rendered his whole claim moot. Either way, it removes the lead plaintiff. No lead plaintiff, no class, no action.

Given the scrutiny that Supreme Court cases receive, and given the fact that class actions are common place in American life, and given that if a mere five justices bought the argument Campbell-Ewald they would have destroyed not only Gomez's suit specifically but class actions generally-- there was surprisingly little coverage of this case. Perhaps that was because the plaintiff’s bar and other court watchers were confident that Campbell-Ewald’s argument would not get enough votes. Even still, the stakes were huge. If Campbell-Ewald had won, then any defendant could similarly pick off any lead plaintiff and end (nearly) any suit.

Whatever the case for the lack of commentary, the Supreme Court voted in favor of Gomez and no less an observer than the New York Times editorial board issued a sigh of relief, in the form of today’s lead editorial.  “This was the right outcome,” the board wrote. “Had the court ruled the other way, it would have allowed companies to make settlement offers just to head off class-action suits — preventing many class actions from ever getting through the courthouse door.”

In the end, though, only three justices thought the clever dilemma that Campbell-Ewald attorneys crafted was a workable argument in a court of law. The other six weren’t buying it.