U.S. Supreme Court Validates Offers of Judgment as a Defense to FLSA Collective Actions but Leaves More Uncertainty in its Wake

04/24/2013

On April 16, 2013, in a 5-4 opinion, the United States Supreme Court decided whether an offer of judgment that fully satisfies the named plaintiff’s individual claim in a Fair Labor Standards Act (“FLSA”) action moots the plaintiff’s collective action claim. In Genesis HealthCare Corporation v. Symczyk, a sharply divided Court answered this question in the affirmative, but only after assuming, and expressly declining to decide, that an unaccepted offer of judgment under Federal Rule of Civil Procedure (“Rule”) 68 renders a plaintiff’s individual claim moot.

Background

Laura Symczyk filed a complaint on behalf of herself and “all other persons similarly situated” under the FLSA’s collective action provision, alleging that Genesis HealthCare Corporation’s automatic meal break deduction policy violated the FLSA. When Genesis answered the complaint, it served a Rule 68 offer of judgment on Symczyk for the amount of her alleged unpaid wages plus reasonable attorneys’ fees, costs, and expenses. Symczyk failed to accept the offer of judgment. At the time of the offer, the plaintiff had not yet moved for conditional certification of any class and no employee had opted in to the lawsuit. Genesis moved to dismiss Symczyk’s FLSA claim on the grounds that her suit was moot because the Rule 68 offer left Symczyk without any personal stake in the outcome of the litigation. Rejecting Symczyk’s argument that Genesis was attempting to “pick her off” to avoid a collective action, the district court granted Genesis’s motion to dismiss. The Third Circuit Court of Appeals reversed, concluding that the collective action was not moot because such calculated attempts by defendants to “pick off” named plaintiffs with Rule 68 offers before certification would frustrate the goals of collective actions.

U.S. Supreme Court Analysis

The Supreme Court overturned the Third Circuit’s decision, holding that the district court properly dismissed Symczyk’s FLSA collective action suit as the offer of judgment mooted her individual claim. Significantly, the Supreme Court assumed without ruling that an unaccepted Rule 68 offer of judgment that fully satisfies a plaintiff’s claim renders such claim moot.

In addressing whether the collective action remained justiciable, the Supreme Court explained that Symczyk’s suit became moot when her individual claim became moot because no other putative plaintiff had opted in to the action. The Court refused to give credence to the “mere presence of collective action allegations,” opining that such allegations standing alone “cannot save the suit from mootness once the individual claim is satisfied.” The Court concluded that Symczyk had no personal interest in representing putative unnamed claimants, nor any other continuing interest that would preserve her suit.

The Supreme Court dismissed Symczyk’s attempts to keep her collective action alive by relying on Rule 23 class action precedent, stating that the Rule 23 cases cited by Symczyk were “inapposite” not only factually, but because “Rule 23 actions are fundamentally different from collective actions under the FLSA.” The Court further explained that “[w]hatever significance ‘conditional certification’ may have in §216(b) proceedings, it is not tantamount to class certification under Rule 23.” This distinction by the Supreme Court between Rule 23 class actions and FLSA collective actions could have potentially grave implications on whether lower courts will apply the Court’s recent Comcast Corporation v. Behrend decision (decided March 27, 2013) to FLSA collective actions. The Comcast decision – that a class alleging antitrust violations was improperly certified because individual damages questions overwhelmed questions common to the class – has been heralded by employment law practitioners as a new weapon for defeating class certification in employment litigation.

The Court Left Unresolved a Split Among the Circuits

The Supreme Court acknowledged that the Courts of Appeals disagree on whether an unaccepted Rule 68 offer of judgment that fully satisfies a plaintiff’s individual claim is sufficient to render that claim moot. For example, the Third, Fourth, Fifth, Sixth, Seventh, and D.C. Circuits have held that making an offer of judgment for full relief (i.e., all damages owed plus reasonable attorneys’ fees and costs) moots a plaintiff’s claims. The Second Circuit, however, requires an additional step before the plaintiff’s claims become moot – the district court actually entering a judgment against the defendant in accordance with the offer of judgment terms (the Sixth Circuit likewise agrees that such a judgment should be entered). The First, Eighth, Ninth, Tenth, and Eleventh Circuits have not definitively answered this question.

The Supreme Court dodged the question and declined to resolve the split, leaving it up to the federal appeals courts to set the rule on whether an unaccepted Rule 68 offer of judgment can moot a named plaintiff’s individual claim.

The majority declined to decide the mootness issue because the plaintiff had conceded it below and failed to preserve the issue for appeal. However, the dissent, in a fiery opinion drafted by Justice Kagan and joined by Justices Ginsburg, Breyer and Sotomayor, vehemently argued that an unaccepted offer of judgment cannot moot a case. Scoffing at the majority’s opinion, Kagan wrote that “an unaccepted settlement offer – like an unaccepted contract offer – is a legal nullity, with no operative effect.” Kagan also imparted a “friendly suggestion” to the Third Circuit to “[r]ethink your mootness-by-unaccepted-offer theory” along with a note to all the other Courts of Appeals of “[d]on’t try this at home.”

Conclusion and Practical Implications

The Genesis decision leaves many open-ended questions in its wake: Does an unaccepted offer of judgment that fully satisfies a named plaintiff’s individual FLSA claim render such a claim moot? Can an employer “pick off” a named plaintiff and moot the lawsuit by making an offer for full relief after the district court conditionally certifies the collective action? Has the Supreme Court essentially foreclosed employers’ ability to use Comcast to defeat conditional certification or to move for decertification of a FLSA collective action?

While the high court may have created more work for the Courts of Appeals to flesh out these issues, its decision nevertheless is a win for employers, validating a defense mechanism to potentially limit costly collective actions: Rule 68 offers of judgment before the named plaintiff moves for conditional certification. Employers willing to pay the named plaintiff’s demand in full should consider as part of their overall defense strategy making an offer of judgment early in the litigation to cut off the plaintiff’s collective action claim.

For more information, please contact the Haynes and Boone attorney with whom you work or any of the following attorneys in the firm’s Labor and Employment Practice Group:

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