The Supreme Court Holds That an Employer May Use Offers of Judgment to “Pick Off” the Class Representatives in an Overtime Suit, But Refuses to Decide the Key Mootness Issue

In a highly anticipated decision, the Supreme Court held today that an employer who is facing a potential collective action for unpaid overtime may use the offer of judgment procedure in Fed. R. Civ. P. 68 to "pick off" the class representatives and thus thwart the collective action.  Genesis Healthcare Corp. v. Symczyk, No. 11-1059 (U.S. April 16, 2013).

The plaintiff had filed a suit against her former employer seeking unpaid overtime.  She also sought the certification of a collective action on behalf of similarly situated employees.  The employer elected to make an offer of judgment in the amount of $7.500.00 plus attorneys' fees.  This procedure is permitted by Rule 68.  The plaintiff did not accept the offer of judgment.

The employer then moved to dismiss the lawsuit on the ground that the offer of judgment rendered the plaintiff's claim moot.  The district court agreed.  Because no other plaintiff had joined the collective action at that point (which meant that there was no longer a class representative), the court dismissed the entire lawsuit for lack of subject matter jurisdiction.  The Third Circuit reversed, holding that an employer could not frustrate the purpose of the collective action process by "picking off" the class representatives through Rule 68.

By a 5-4 margin, the Supreme Court (per Justice Thomas) reversed the Third Circuit and ordered the case dismissed.  The Court stated:

[W]e conclude that respondent has no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness. Respondent’s suit was, therefore, appropriately dismissed for lack of subject-matter jurisdiction.

Accordingly, the employer successfully evaded a potential collective action suit simply by offering $7,500.00 to the plaintiff who brought the original lawsuit.

However, the Court side-stepped the issue of whether it made a difference that the plaintiff refused the offer of judgment.  The court noted that the plaintiff had conceded in the lower courts that the offer of judgment mooted her claim:

In the proceedings below, both courts concluded that petitioners’ Rule 68 offer afforded respondent complete relief on—and thus mooted—her FLSA claim.  Respondent now contends that these rulings were erroneous, because petitioners’ Rule 68 offer lapsed without entry of judgment.  The United States, as amicus curiae, similarly urges the Court to hold that petitioners’ unaccepted offer did not moot her FLSA claim and to affirm the Court of Appeals on this basis.

 While the Courts of Appeals disagree whether an unaccepted offer that fully satisfies a plaintiff’s claim is sufficient to render the claim moot, we 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.  Acceptance of respondent’s argument to the contrary now would alter the Court of Appeals’ judgment,which is impermissible in the absence of a cross-petition from respondent.  Moreover, even if the cross-petition rule did not apply, respondent’s waiver of the issue would still prevent us from reaching it.In 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.

With that issue remaining unresolved, it is a fair question whether the Supreme Court's decision actually means anything.  The Supreme Court's decision boils down to "If the plaintiff agrees that her claim is moot, then she cannot continue to litigate a collective action."  But what if the plaintiff does not concede the mootness issue?

The dissent (per Justice Kagan) mocked the majority opinion on this ground:

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 FairLabor Standards Act of 1938 (FLSA), 29 U. S. C. §201 et seq., "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? And what if, in addition, no similar claim for damages will ever become moot? In that event, the majority’s decision—founded as it is on an unfounded assumption—would have no real-world meaning or application. The decision would turn out to be the most one-off of one-offs, explaining only what (the majority thinks) should happen to a proposed collective FLSA action when something that in fact never happens to an individual FLSA claim is errantly thought to have done so. That is the case here, for reasons I’ll describe. Feel free to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise.

. . . .

. . . By those measures, an 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.  As every first-year law student learns, the recipient’s re- jection of an offer "leaves the matter as if no offer had ever been made."  Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that "[a]n unaccepted offer is considered withdrawn."  So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.

. . . .

The Court could have resolved this case (along with a Circuit split) by correcting the Third Circuit’s view that an unaccepted settlement offer mooted Symczyk’s individual claim.  Instead, the Court chose to address an issue predicated on that misconception, in a way that aids no one, now or ever.

Unfortunately, the dissent is probably right on this point.  Other plaintiffs are not going to make the mistake of conceding that an unaccepted offer of judgment renders their claims moot.  While the Supreme Court held that Rule 68 requires the dismissal of a collective action if the offer of judgment renders the plaintiff's claim moot, the Supreme Court ducked the controlling issue of whether the offer of judgment renders the claim moot.

David C. Holmes is a Houston employment lawyer with The Law Offices of David C. Holmes

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