Contributed by Caryl Flannery and Molly Arranz
This week, in a 5-4 decision written by Justice Thomas, the U.S. Supreme Court ruled that a Fair Labor Standards Act case is no longer justiciable when the lone plaintiff’s individual claim becomes moot—even if there were collective-action allegations in the complaint. Genesis Healthcare Corp. v Symczyk, — S. Ct. —, Case No. 11-1059, (April 16, 2013).
Laura Symczyk worked as a nurse at facility owned by Genesis. After her employment ended, she filed a collective action complaint in federal court claiming that Genesis Healthcare’s practice of automatically deducting pay for employee breaks, whether or not the employee worked during the break, violated the Fair Labor Standards Act (FLSA). The FLSA permits employees to file “collective actions” on behalf of themselves and other “similarly situated” employees. Unlike a Rule 23 class action case, however, each employee must affirmatively join a collective action.
When answering Symczyk’s complaint, Genesis tendered a Rule 68 offer of judgment for $7,500 (the maximum amount that Symczyk could have recovered for alleged unpaid wages), together with reasonable attorneys’ fees, costs and expenses “as the Court may determine.” The offer of judgment included a caveat that it would expire in 10 days. When Symczyk did not respond to the Rule 68 offer in the stated time, Genesis moved to dismiss the suit, arguing that the offer of full satisfaction left Symczyk without an interest—a personal stake—in the case. The district court agreed, finding Symczyk, the only plaintiff, no longer possessed an actual controversy, and dismissed the case as moot.
The Third Circuit reversed. Though the Court of Appeals conceded that no other plaintiff had yet opted into the lawsuit, that the offer fully satisfied Symczyk’s claims and that under Third Circuit precedent, the offer—whether or not accepted—generally triggers the mooting of the claim, it found that these strategic “pick off” offers should not frustrate the goals of collective actions.
Plaintiffs’ attorneys and employee unions and groups from around the country sided with the Third Circuit. In numerous amicus briefs, they advanced arguments that employers should not be able to buy their way out of these FLSA actions by “picking off” the first plaintiff before any other employees could join or prior to briefing of conditional certification. In response, employer groups filed their own amicus briefs arguing that employers should not have to defend themselves against claims by absent parties for injuries that were only theoretical.
The Supreme Court reversed the Third Circuit, holding that once the claim of a sole representative in a collective action becomes mooted by an offer of judgment, the case can be dismissed for lack of subject matter jurisdiction. There is no longer a case or controversy. The Court emphasized that “the mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied.” Significantly, the Supreme Court did not resolve a Court of Appeals split on whether an unaccepted offer that fully satisfies a plaintiff’s claim is, in itself, sufficient to render the claim moot—claiming that this argument had been waived.
Initially, employers are claiming victory. Collective and class actions have become an expensive thorn in the sides of employers and a favored tool of disgruntled employees, aggressive government agencies, and plaintiffs’ attorneys looking to maximize the return on their investments. This decision can be read to provide a clear tool for short-circuiting a collective action. Moreover, the decision reinforces the concept that conditional certification of a collective action is not nearly as significant as certification of a Rule 23 class action.
Yet, this decision may also be seen as employers winning a battle—but not the war. For a few reasons, the dissent’s statement that this case is “the most one-off of the one-offs” rings true. The dissent recognized the reality of the case: that Symczyk walked away with nothing—the Rule 68 offer was never accepted, such that her case was dismissed without any recovery for her. The majority’s opinion flowed from the failed premise, the dissent advanced, that an unaccepted offer of settlement rendered a plaintiff’s claims moot and relieved her of all interest in a case.
Likely, the savvy plaintiffs’ attorney will simply take her cues from this decision in at least two ways: filing (even a perfunctory) motion for conditional FLSA certification or class certification at the time of filing the complaint—before the defendant even has a chance to make a Rule 68 offer; and/or, by pleading less clear recovery, including equitable relief, such that an employer will have difficulty putting together a Rule 68 offer to satisfy the individual plaintiff, fully. In addition, the majority’s holding did not address the question of whether an offer not accepted moots a claim, so the far-reaching implications many had hoped for are not found.