SCOTUS Will Soon Decide Whether An Employer Can Moot An FLSA Collective Action Through Rule 68 Offer of Judgment
This term the Supreme Court granted cert to Genesis HealthCare Corp. v. Symczyk, No. 11-1059, an appeal from the Third Circuit decision, 656 F.3d 189 (3d Cir. 2011). At issue is whether a defendant can moot a putative Fair Labor Standards Act (“FSLA”) collective action by “picking off” the named plaintiff through a Rule 68 offer of judgment before certification. While the Court’s decision will no doubt impact the future viability of wage and hour collective actions, it may also have the potential to affect Rule 23 class actions as well.
Briefly, the plaintiff, Laura Symczyk, alleged that her employer, Genesis, improperly deducted her pay for meal breaks even though she often did not take them. After answering, Genesis proffered a Rule 68 offer of judgment of “$7,500.00 in alleged unpaid wages, plus attorneys’ fees, costs and expenses.” After the plaintiff refused the offer, Genesis moved to dismiss, 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 agreed and dismissed the case.
The Third Circuit reversed, and stated that as a matter of policy, “conventional mootness principles do not fit neatly within the representative action paradigm.” 656 F.3d at 195. Despite the procedural differences, the court compared FLSA collective actions to Rule 23 class actions, in which the court had previously held 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.
While we await the Supreme Court’s decision, lawyers in the Kansas City area should be aware of what our local courts have have said about the practice should they try to employ this tactic in the interim in both Rule 23 and FLSA actions.
The Tenth Circuit most recently addressed the issue under the Rule 23 context in Lucero v. Bureau of Collection Recovery, Inc., 639 F. 3d 1239 (10th Cir. 2011). In Lucero, the court noted the same tension between Rules 23 and 68 as the Third Circuit did in Symczyk, remarking that there is “no express statement in the rules limits the application of rule 68 in class action complaints.” Lucero, 639 F.3d at 1244. Instead, the court looked to previous SCOTUS precedent which has expanded the so-called class action exception to mootness. See generally Sosna v. Iowa, 419 U.S. 393 (1975), Gerstein v. Pugh, 420 U.S. 103 (1975), Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326 (1980), U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980). The court ultimately concluded that based on this precedent “a nascent interest attaches to the proposed class upon the filing of a class complaint such that a rejected offer of judgment for statutory damages and costs made to a named plaintiff does not render the case moot under Article III.” Lucero, 639 F.3d at 1249. The court, however, appeared to limit its holding to a time period “before a court can reasonably be expected to rule on [a] class certification motion.” Id. The court further expressly declined to address how a Rule 68 offer of judgment would impact a collective action under the FLSA. Id.
In the Eighth Circuit, this appears to be an issue of first impression. The only court that we are aware of have addressed the issue in the FLSA context is Roble v. Celestica Corp., 627 F. Supp. 2d 1008 (D. Minn. 2007). In Roble, the defendant tendered its Rule 68 offer of judgment three days prior to the plaintiff’s motion for collective certification, yet the district court denied a motion to dismiss on mootness grounds because the plaintiff had identified other potential employees with an interest in the litigation, satisfying the case-or-controversy requirement of Article III. Roble, 627 F. Supp. 2d at 1013-14. The court held that the Rule 68 offer did not moot the claim because of a trivial “race to the courthouse,” wherein allowing such a strategy would “frustrate” the FSLA’s collective action provision and “endorse an unacceptably narrow understanding of Article III.” Id.