Supreme Court Preserves Class Action Rights

The U.S. Supreme Court handed consumers and plaintiffs an important victory today, preserving the right to bring a class action against a corporate attempt to “buy off” the class representative. Writing for a 6-3 majority, Ruth Bader Ginsburg delivered the opinion siding with the plaintiff who challenged a violation of the Telephone Consumer Protection Act (“TCPA”).

The case of Campbell-Ewald v. Gomez seeks to enforce a federal law that protects cell phone users against unwanted marketing and debt collection calls. The defendant Campbell-Ewald is a private contractor acting as a U.S. Navy recruiter. Without any permission or prompting, it sent one or more texts to Jose Gómez recruiting him to join the Navy. Almost 40 years old at the time, Gomez had never consented to receiving the text. To stop this annoying practice, he filed suit alleging the company violated the TCPA, a federal law that forbids unsolicited advertisements placed to cell phones. One of the problems that the law seeks to address is the ease at which a marketing or recruiting firm can blast an advertisement at thousands of people, many of whom must pay to receive cell phone calls or texts. The nature of the law is such that it is most commonly enforced only if claims can be brought as class actions, because each individual’s recovery could be too small to make it worth hiring a lawyer to go to court.

Gomez sought to bring the case as a class action against Campbell-Ewald. If he had done this alone, as an individual plaintiff, the defendant would have either ignored him, or made the case so expensive he would likely give up. But facing a potential class action in which it might have to pay statutory damages to numerous class members for every violation of the law, the defendant had to pay attention. The defense strategy was to get rid of Gomez’ right to represent the class. So they sent him an offer to settle his case alone for $1,503 hoping to buy him off. He declined to accept the offer, as it would sell out the class and not stop the illegal recruiting practice he was challenging. Campbell-Ewald claimed their offer had disposed of the case.

Justice Ginsburg and the court majority ruled the that businesses like Camapbell-Ewald can’t just “moot” a case by simply offering to settle it with the person who first brought it if the person rejected the offer. Although Gomez was seeking to enforce a Federal statute, The TCPA, the defendants offer of settlement was based on the common law of contract.

“Like other unaccepted contract offers, it creates no lasting right or obligation,” Justice Ginsburg reasoned. “With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.” That remaining controversy was good enough for his claim to remain active in the courts. However, the Court noted that in this particular instance Campbell-Ewald had just offered to pay him the money, and it left open the question of whether the result would have been different if Campbell-Ewald had actually paid up and made Gomez whole, rather than merely having offered to pay.

Attorneys, advocates, academics and the business community were all waiting for this decision to issue, because class action device – and collective redress of corporate misconduct – depends on the willingness of people like Jose Gómez to act as class representatives. If the corporate defendant can manage to remove a class representative from the case — by separate settlement for example — the whole class action could evaporate.

Undoubtedly, that was what Campbell-Ewald was hoping for. But, for the time being, it looks like class actions are here to stay.