October 21, 2014

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October 20, 2014

Supreme Court Finds Fair Labor Standards Act (FLSA) Collective Action Mooted By Offer Of Judgment

In a traditional lawsuit, when a defendant offers a plaintiff the full amount the plaintiff seeks, that generally ends the litigation because the plaintiff no longer has a justiciable interest in the matter.  On April 16, 2013, the Supreme Court held in Genesis Healthcare Corp. v. Symczyk that a collective action under the Fair Labor Standards Act (FLSA) affords no exception to that rule.

Symczyk, a registered nurse, sued her former employer, Genesis Healthcare Corporation, a nursing home operator, for allegedly automatically deducting a half hour’s pay for lunch breaks irrespective of whether an employee took one.  Symczyk brought her claim as a collective action under the FLSA, which requires that similarly situated employees must opt in to the action in order to be represented by the plaintiff.

Two months after Symczyk filed her complaint, Genesis offered her full recovery on her claim, plus attorneys’ fees and costs, pursuant to Federal Rule of Civil Procedure 68.  The offer gave Symczyk 10 days in which to respond.  Symczyk failed to respond within 10 days, after which Genesis moved to dismiss on the ground of mootness.  The District Court granted the motion, reasoning that no other plaintiffs had joined the action and that Symczyk’s individual claim was moot because she could not recover more than Genesis had offered her.  The Third Circuit reversed.  Although it found that the settlement offer mooted Symczyk’s individual claim, it ruled that the defendant’s strategy nonetheless frustrated the FLSA’s goals by “short circuit[ing]” the collective action process.

On April 16, 2013, the Supreme Court reversed. 

In doing so, the majority declined to reach the question of whether Symczyk’s individual claim had been mooted by virtue of an unaccepted offer, finding that the question had been waived:

[W]e do not reach this question, or resolve the split, because the issue is not properly before us.  The Third Circuit clearly held in this case that respondent’s individual claim was moot….  Moreover, … [i]n the District Court, respondent conceded that “[a]n offer of complete relief will generally moot the [plaintiff ’s] claim, as at that point the plaintiff retains no personal interest in the outcome of the litigation.”  Respondent made a similar concession in her brief to the Court of Appeals, and failed to raise the argument in her brief in opposition to the petition for certiorari.  We, therefore, assume, without deciding, that petitioners’ Rule 68 offer mooted respondent’s individual claim. 

Relying on Article III's case-or-controversy requirement, the majority concluded that the District Court properly dismissed the case because "respondent has no personal interest in representing putative unnamed claimants or any other continuing interest" and thus "respondent's interest became moot when her individual claim became moot."  Justice Thomas concluded by noting that the claims of employees other than Symczyk had not been extinguished:  “While settlement may have the collateral effect of foreclosing un-joined claimants from having their rights vindicated in respondent’s suit, such putative plaintiffs remain free to vindicate their rights in their own suits.  They are no less able to have their claims settled or adjudicated following respondent’s suit than if her suit had never been filed at all."

Justice Kagan’s dissent took the majority to task for relying on legal errors that she believes the lower courts had committed and the plaintiff had not challenged below:  

The Court today resolves an imaginary question, based on a mistake the courts below made about this case and others like it.  The issue here, the majority tells us, is whether a ‘collective action’ brought under the [FLSA] ‘is justiciable when the lone plaintiff’s individual claim becomes moot.’  Embedded within that question is a crucial premise: that the individual claim has become moot, as the lower courts held and the majority assumes without deciding.  But what if that premise is bogus?  What if the plaintiff’s individual claim here never became moot? …. Feel free to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise.

She then proceeded to offer her answer to the question the majority had declined to reach:

[A]n unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before.  And so too does the court’s ability to grant her relief.  An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect….  Nothing in Rule 68 alters that basic principle….  So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted. 

She concluded by complaining that allowing a defendant to “eliminate the entire suit by acceding to a defendant’s proposal to make only the named plaintiff whole ... would short-circuit a collective action before it could begin, and thereby frustrate Congress’s decision to give FLSA plaintiffs the opportunity to proceed collectively.” 

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Partner

Michael Daly is a partner whose practice focuses on class action and appellate litigation. In 2010, The Legal Intelligencer named him a "Lawyer on the Fast Track," an honor it awards to “future leaders of the state’s legal community” who “have worked tirelessly in their professional, personal and civic lives to improve the legal landscape and the future of others.” 

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Susan M. Roach is counsel in the Communications Litigation Practice Group. She joined the firm in 2000 after beginning her career as an energy lawyer in Washington, D.C.

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Michael Metz-Topodas, Commercial Litigation Attorney, Drinker Biddle Law Firm
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Michael Metz-Topodas is an associate in the firm’s Commercial Litigation Practice Group.

Commercial Litigation. Michael’s litigation experiences span a range of commercial matters, including business disputes, insurance, products liability, consumer class actions, real estate issues, and shareholder disputes and other corporate governance issues.  Michael has handled various aspects of civil litigation from beginning to end: pre-litigation counseling, discovery, dispositive motion practice, trial advocacy, and post-trial proceedings and briefing.

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