In Campbell-Ewald Co. v. Gomez, 577 U.S. 153, 163 (2016), as revised (Feb. 9, 2016), the Supreme Court held that an unaccepted offer of judgment cannot moot a plaintiff’s claims. While that decision left some questions unanswered, recent Court of Appeals decisions have applied its reasoning to broader situations, such as holding that an unaccepted refund offer made prior to litigation does not deprive a plaintiff of standing to sue.  Adam v. Barone, 41 F.4th 230, 234 (3d Cir. 2022).

Another court recently added a twist to the analysis, holding that offering a full refund may make dismissal appropriate under the prudential mootness doctrine.  See Sharp v. FCA US LLC, 2022 WL 14721245 (E.D. Mich. Oct. 25, 2022).

In Sharp, 15 plaintiffs—seeking to represent a putative class of individuals from 18 states—alleged that they purchased trucks with defective fuel injection pumps that could cause engine failure.  Id. at *2.  Investigation of those fuel injection pumps by defendants and the National Highway Traffic Safety Administration (NHTSA) resulted in a phased recall of the trucks that included promises to replace the fuel injection pump and other components if needed. Id. Although all of the plaintiffs had access to this recall program, and although only four plaintiffs experienced engine failure as a result of the defect, id. at *3, all of the plaintiffs alleged that the existence of the defect had deprived them of the “benefit of their bargain,” id. at *4.

The court held that almost all of the plaintiffs had, in fact, suffered an actual injury, giving rise to Article III standing.  According to the court, those plaintiffs plausibly alleged that the trucks they purchased had a defective fuel injection pump that had generated “metal shavings that contaminate the fuel system, eventually leading to catastrophic engine failure.”  Id. at *5. (internal marks omitted).  For that reason, all of those plaintiffs suffered some amount of engine damage—and thus Article III injury.  See id.

Nevertheless, the court still dismissed their claims under the doctrine of prudential mootness.  Id. at *7.  It held that in cases where a “coordinate branch of government steps in to promise the relief” that plaintiffs seek, the judiciary can exercise discretion to dismiss the suit in deference to the other branch, so as to avoid “needless inter-branch disputes over the execution of the remedial process.”  Id. at *6 (internal marks omitted).  Applying that standard to the facts before it, the court noted that because the NHTSA had been notified of the defect, the parties were in the middle of “the great grinding gears of a statutorily mandated and administratively overseen national recall process.”  Id. (internal marks omitted).  For that reason, even though the plaintiffs had Article III standing, the prudential mootness doctrine weighed in favor of deference to the NHTSA.  Id. at *6–7.  Notably, the court held that even the plaintiffs’ claims for monetary relief for their lost “benefit of the bargain” were subject to dismissal under the prudential mootness doctrine—even though the agency had not directed the vehicle manufacturer to provide such relief to plaintiffs.  Id. at *8. 

The Sharp decision is a good reminder that although Campbell-Ewald and its progeny have made it more difficult to argue that a refund offer deprives a plaintiff of Article III standing, the prudential mootness doctrine may still be available to defendants—such as where a refund is part of a statutory recall process that is overseen by an administrative agency.