Today the United States Supreme Court delivered an unexpected present to employers facing FLSA collective actions and held that a defendant may moot such a case by making a Rule 68 offer of judgment to the named plaintiff.  Genesis Healthcare Corp. v. Symczyk, Case No. 11-1059 (Apr. 16, 2013).  We wrote about the lower court’s decision in Symczyk on September 8, 2011, as well as a similar case decided by the Ninth Circuit at roughly the same time, Pitts v. Terrible Herbst, Inc.  In the Symczyk case, the  plaintiff brought FLSA claims challenging the employer’s use of an “auto-deduct” policy for meal periods.  Along with its answer, the defendant made a Rule 68 offer to the plaintiff of judgment for $7,500, plus attorney fees and costs to be determined by the court.  The offer, by its terms, was open for 10 days. When the plaintiff did not respond to the offer, the defendant moved to dismiss the case. The district court dismissed the FLSA claims on the basis of Rule 68 and remanded the remaining state law claims. The Third Circuit, however, citing its concern that a defendant could simply “pick off” named plaintiffs in FLSA collective cases by using Rule 68, reversed.

The Supreme Court reversed the Third Circuit and found that the district court had correctly dismissed the case.  Because the plaintiff did not contest that her own personal claim would have been satisfied by the offer, the majority assumed that it did, indeed, moot her individual claim.  This is a significant assumption because, as noted by the dissent, not all circuits agree that an unaccepted offer, as opposed to one the plaintiff does accept, will moot a plaintiff’s claim.  Finding the claim moot, the Court concluded that the had no personal stake in the outcome of the remainder of the case.  It further found that there was no basis to have claims of other future opt-ins “relate back” because at the time the employer filed its Rule 68 offer, no motion to certify a class was pending.  The Court specifically rejected the argument that a district court could disregard an offer of judgment to prevent a defendant from “picking off” plaintiffs. It found that such concerns could only arise in cases under Rule 23, such as certain Constitutional claims, in which the relief sought was “transitory” or “fleeting.”  Claims under the FLSA are not “fleeting” because they involve monetary damages. 

The Court concluded that an offer of judgment under Rule 68 that satisfies the representative plaintiff’s claims moots a putative collective action under the FLSA.

As we noted before, courts have been less than receptive to offers of judgment.  Decisions like that of the Third and Ninth Circuits, which presume an improper motive on the part of the defendant,  ignore the fact that FLSA collective action litigation is unduly expensive and time-consuming even for employers that have complied with the statute.  As with the issue of arbitration and the Supreme Court’s decision in AT&T Mobility v. Concepcion, 563 U.S. ____(2011), it may be that this decision will start a thaw in the courts’ reluctance to enforce Rule 68’s provisions.  With this opinion, offers of judgment may become a more viable means for employers to cut off FLSA collective actions brought by individual disgruntled employees before undertaking the substantial cost of their defense.

Offers of judgment, however, are still not a panacea for collective action woes.  First, to make such an offer, one must agree to pay the amount of the claim and attorney fees.  The amount of the claim may not be ascertainable, and with a potential three-year statute of limitations and liquidated damages, the amount in many cases may be substantial.   If, for example, a well-compensated employee complains of having been misclassified and of working 10 hours per week of overtime, the number may fall into the tens of thousands of dollars and lose the right to demonstrate that the number of hours worked was far lower or, for that matter, its defense on the merits. The defense is also taking on an unknown quantity of attorney fees and will likely have to incur the cost of litigating what a reasonable fee might be.  If there are state law Rule 23 claims, the offer may be of lesser utility, although this issue is unsettled.   Moreover, there remains a split in the circuits as to the effect of such an offer if the plaintiff rejects it, as well as the serious skepticism with which courts have greeted Rule 68 offers in the past.  Even with this new Supreme Court decision, offers of compromise will not be of benefit in every case, but might be considered as part of an overall strategy.

The bottom line:  The Supreme Court has held that a Rule 68 offer of judgment to the named plaintiff may moot the case, but such offers should still be explored carefully before making them.