Justice Kennedy Holds the Key to the Future of Class Actions

Class actions are one of the best features of the American legal system. (Corporate defense lawyers and general counsel may disagree, but hear us out.) Get an unfair fee from your bank? Buy a cheap product that doesn't live up to its claims? Unjustly detained by police? Class actions are your solution. They're the main way our Lilliputian wrongs get righted.

But what if the head class representative gets justice while the rest of the injured go wanting? Is the case moot? The Supreme Court addressed just these questions this week in a case that could drastically undermine the power of class action litigation. As always, the deciding vote is in Justice Kennedy's hands.

From Text Spam to the Supreme Court

Class actions are a uniquely American legal tactic: let the little guys come together to get otherwise minor grievances heard. But each class needs a representative, the individuals who give faces (and facts) to plaintiffs who would otherwise be little more than names on a list.

One such class representative was Jose Gomez, who led class action after receiving an unsolicited text prohibited under the Telephone Consumer Protection Act. Each violation of the TCPA comes with a $500 to $1500 fine -- not enough for Gomez to bring suit on his own, but a big enough to justify pursuing a class action lawsuit. When Gomez brought suit, the offending company, Campbell-Ewald, offered him $1500.

Gomez refused the settlement even though he couldn't have gotten any more in court. As class representative, if he had settled, the class action would end and a new plaintiff would be needed to represent the class. Campbell-Ewald convinced the district court judge that the case was moot -- the court could offer Gomez no more relief than he would get without a trial -- and the case made its way up to the High Court.

Once Again, Everyone's Arguing to Kennedy

The Supreme Court heard oral arguments on Wednesday. There were a few interesting side issues, like whether derivative sovereign immunity applies to government contractors who telemarket for Uncle Sam (Campbell-Ewald's spam text was an ad for the Navy), but those were largely ignored. Instead, the Justices focused solely on whether a case becomes moot when a plaintiff receives an offer of complete relief.

Justice Kennedy seemed skeptical towards Campbell-Ewald's arguments. "It seems you want us to write an opinion saying that a settlement offer is equivalent to a judgment," he said, noting that such a ruling wouldn't comport with the Federal Rules of Civil Procedure or Court precedent.

Justice Kennedy matters. Justices Kagan, Ginsburg, Breyer, and Sotomayor -- the Court's liberal wing -- have already gone on record saying that an unaccepted settlement offer does not moot a case in dissent 2012's Genesis HealthCare Corp. v. Symczyk. The Court's conservatives seemed unsympathetic to Gomez. If he wanted more than the relief he was entitled to individually, he might as well request the key to Fort Knox or a unicorn, Justice Scalia mused. (Gomez also wants attorney's fees and injunctive relief, which Campbell-Ewald has not offered.)

For his part, Justice Kennedy seemed torn. He seemed skeptical as to whether defendants should be able to end class actions with a settlement offer alone. Justice Breyer gave hints of a possible out, allowing defendants to tender payment to the court if plaintiffs won't accept and the court to enter judgment in favor of the plaintiff. That would allow defendants to evade the class action and may satisfy Justice Kennedy, but would also seem to contradict the Genesis dissent.

But who knows. Maybe they'll decide the case on derivative sovereign immunity after all.

Even More Oral Arguments

Speaking of oral arguments, the first recordings of the October 2015 Term are now available to the public. Go check them out and listen to what the Court won't let you see.

Related Resources:

• Supreme Court Mulls Potentially Devastating Defense Against Class Actions: Surrender (Forbes)
• Will SCOTUS Let FLSA Defendants 'Buy Off' Putative Class Reps? (FindLaw's U.S. Supreme Court Blog)
• U.S. Supreme Court Denies Walmart Class Action Lawsuit (FindLaw's U.S. Supreme Court Blog)
• SCOTUS and Big Business, Sitting in a Tree? New Study (FindLaw's U.S. Supreme Court Blog)