The United States Supreme Court recently granted certiorari of a decision by the Third Circuit Court of Appeals, Symczyk v. Genesis HealthCare Corp., 656 F.3d 189 (3d Cir. 2011), a case that could have a significant impact on employers’ litigation strategy in putative FLSA collective actions.  The Third Circuit in Symczyk held that a collective action brought under the FLSA is not rendered moot when the defendant makes a Rule 68 offer of compromise in full satisfaction of the individual claim to a putative representative before the class representative moves for “conditional certification” and before any other plaintiff opts into the action.

Under the FLSA, an employee may file a “collective action” against an employer on behalf of himself and other similarly situated employees.  Unlike traditional class actions, however, the FLSA requires that the “similarly situated” employees affirmatively decide to join or opt into the collective action.  In Symczyk, the plaintiff filed a putative FLSA collective action, alleging that her employer, Genesis, automatically deducted her pay for meal breaks regardless of whether she performed any compensable work during the break.  After answering the Complaint, Genesis served the plaintiff with an offer of judgment for the full amount of her claims, including costs and attorneys’ fees, pursuant to Federal Rule of Civil Procedure 68.  Genesis then moved to dismiss the Complaint, arguing that the offer to pay her claims in full mooted the claims, depriving the plaintiff of any ongoing personal stake or legally cognizable interest in the litigation, and divesting the court of any jurisdiction over the case.

The district court granted Genesis’ motion, holding that an offer in full satisfaction of a plaintiff’s claims moots those claims.  At this point, no other employees had opted into the suit because the plaintiff had not yet sought conditional certification of the collective action.  Thus, the case was dismissed.  The Third Circuit reversed, holding that “conventional mootness principles do not fit neatly within the representative action paradigm.” Id. at 195.  The court compared FLSA collective actions to class actions, in which it is settled law that a defendant cannot moot a putative class action by making an offer of judgment to the named plaintiff before the class is certified and held that there was no rationale for treating the two types of actions differently.  Id. at 197-201.

Accordingly, the Third Circuit reversed, holding that “[w]hen Rule 68 morphs into a tool for the strategic curtailment of representative actions, it facilitates an outcome antithetical to the purposes behind [the FLSA].”  Id. at 200.  The Third Circuit remanded to the district court in order to allow the plaintiff to file a motion for conditional certification, which would then be deemed to “relate back” to the filing of the original complaint and thus preserve the district court’s subject matter jurisdiction. Id. at 201  The Third Circuit noted that if the mootness inquiry were based solely on whether another employee had opted in at the same moment a plaintiff receives a Rule 68 offer of judgment, employers would encounter little or no difficulty in “preventing FLSA plaintiffs from attaining the “representative” status necessary to render an action justiciable.”  Id. at 199.

The Third Circuit’s decision in Symczyk cited with approval the Fifth Circuit’s decision in Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 922 (5th Cir. 2008) (holding that, although a Rule 68 Offer of Judgment could theoretically moot a FLSA collective action, the “relation back principle applies to ensure that defendants cannot unilaterally “pick off” collective action representatives and thwart availability of collective actions under the FLSA.”)

However, both the Ninth and Eleventh Circuits have held, to the contrary, that an offer of judgment for the full amount of the named plaintiff’s claims prior to the certification of a class does moot a collective action. See Smith v. T-Mobile USA, Inc., 570 F.3d 1119, 1122-23 (9th Cir. 2009); Cameron-Grant v. Maxim Healthcare Serv., Inc., 347 F.3d 1240 (11th Cir. 2003).

The Supreme Court granted Genesis’ petition for certiorari on June 25, 2012 and stated the question presented as “Whether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff’s claims.”  The Supreme Court’s decision in this case will likely have a significant impact on the strategies available to employers to defend against FLSA collective actions and will also resolve a circuit split on this issue.

The Court will hear the case in the term beginning October 2012, and a ruling is expected by the end of the term in June 2013.