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Supreme Court levels a big win for employers facing collective class actions, but can it be replicated?

April 19th, 2013  |  Pamela Wolf

The U.S. Supreme Court delivered what many employers facing collective class actions would consider a big win earlier this week, but unfortunately, the High Court didn’t rule on the predicate issue in the case, so exactly how to get to the big win is still a source of confusion. The potential for a huge impact on the ever-increasing number of FLSA collective actions is therefore muted.

The case. After an employee’s individual claim under the FLSA was rendered moot when she ignored an employer’s offer of judgment under FRCP 68 that fully satisfied her claim, she no longer had a personal interest in representing the putative, unnamed claimants, so her FLSA collective action suit was appropriately dismissed for lack of subject matter jurisdiction, ruled a divided Court in a 5-4 decision (Genesis Healthcare Corp v Symczyk, April 16, 2013, Thomas, C). Justice Kagan filed a dissenting opinion in which Justices Ginsberg, Breyer and Sotomayor joined.

The employee, a registered nurse at a health care center, brought an FLSA collective action alleging that her former employer violated the Act by automatically deducting 30 minutes per shift for meal breaks, even when the employee performed compensable work during those breaks. Throughout the proceedings, she remained the sole plaintiff. When the employer answered the complaint, it simultaneously served her with a Rule 68 offer of judgment. The offer included $7,500 for alleged unpaid wages, in addition to reasonable attorneys’ fees, costs, and expenses. After the employee failed to respond within the allotted time period, the employer filed a motion to dismiss for lack of subject-matter jurisdiction.

Personal stake question. The employer argued that because it offered the employee complete relief on her individual damages claim, she no longer possessed a personal stake in the outcome of the suit, rendering the action moot. On the other hand, the employee argued that the employer was attempting to “pick off” the named plaintiff before the collective action process could unfold. The district court agreed with the employer, finding that because no other individuals had joined the suit and that the Rule 68 offer of judgment fully satisfied her individual claim, the suit was moot and so it dismissed the action for lack of subject matter jurisdiction.

On appeal to the Third Circuit, the district court judgment was reversed. While the appeals court agreed that the employee’s individual claim was moot, it nevertheless held that the collective action was not, explaining that allowing the employer to “pick off” named plaintiffs before certification with calculated Rule 68 offers would frustrate the goals of collective actions. The appeals court determined that the case must be remanded in order to allow the employee to seek “conditional certification.”

Justiciable claim remaining? Before the Supreme Court, the employee challenged the rulings by the courts below that the offer of judgment mooted her FLSA claim. However, because the employee conceded that her individual claim was moot, and she did not properly raise the issue here, the High Court assumed that the offer of judgment mooted the individual claim. Thus, the question remaining before the Supreme Court was whether the employee’s FLSA collective action remained justiciable.

Majority. The majority concluded that in the absence of any claimants opting in, the collective action became moot when the employee’s individual claim became moot because she lacked any personal interest in representing others in this action. The mere presence of collective action allegations in the complaint was not enough to save the suit from mootness once the individual claim was satisfied.

Moreover, the employee could not rely on cases arising in the Rule 23 context to avoid this result. The Court also rejected the employer’s argument that the purposes served by the FLSA’s collective action provisions would be frustrated by the employer’s use of Rule 68 to “pick off” named plaintiffs before the collective action process has run its course. Thus, the majority concluded that this action was appropriately dismissed as moot.

Dissent. In a very spirited and colorful dissent, Justice Kagan pointed out that Rule 68 precludes a court from imposing judgment based on an unaccepted settlement offer made pursuant to its terms. Here it was clear that the plaintiff never accepted the offer of judgment and by its terms it expired. The text of the rule contemplates that a court will enter judgment only when a plaintiff accepts an offer. The rule also prohibits a court from considering an unaccepted offer for any purpose other than allocating litigation costs — including for the purpose of entering judgment for either party. That injunction accords with the exclusive purpose of Rule 68, declared the dissent, to promote voluntary cessation of litigation by imposing costs on plaintiffs who spurn certain settlement offers. Thus, the dissent argued that Rule 68 does not provide a mechanism for a court to terminate a lawsuit without the plaintiff’s consent. It is the plaintiff’s choice, not the defendant’s or the court’s, whether satisfaction of her individual claim, without redress of her viable classwide allegations, is sufficient to bring a lawsuit to an end.

Can this ever happen again? As Justice Kagan points out in her dissent, the majority did not resolve the predicate question here ― whether the employee’s failure to accept the Rule 68 offer of judgment before it expired rendered her claim moot. According to Kagan, it did not and never could. So the majority overlooked the fact that it assumed a situation that would not ever exist, except perhaps due to waiver. Seizing the opportunity to declare an outcome the majority greatly desired, under Kagan’s perspective, the majority then determined that this unlikely circumstance rendered the entire collective action moot.

Courts are in disagreement as to whether the failure to accept a Rule 68 offer of judgment renders an individual FLSA claim moot. The Supreme Court’s ruling doesn’t resolve the split, but by virtue of the big potential payoff, it perhaps encourages employers to diligently serve Rule 68 offers of judgment fully satisfying the plaintiff’s claims along with every answer to a collective action complaint.
Will it fly? Who knows? Some courts will continue to resist the transparent attempt to pick off the lead plaintiff and cut the legs out from under the collective action. Others, however, may find it an easy jump from the waiver circumstances in this case, to a ruling that an unaccepted offer of judgment wholly satisfying the named plaintiff’s claims wipes out her individual claim. You know the rest of the story from there.

Will someone please remind me why we have collective class actions?

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