Plaintiffs frequently include collective action allegations in even run-of-the-mill FLSA cases. What if an employer concludes, however, that no matter how frivolous the underlying claim, the defense costs will be more than even an oversized settlement?

In theory, an offer of judgment under Federal Rule 68 would be one avenue. By offering the plaintiff all they can possibly recover in the case, shouldn’t that cut off the case (and the expected great defense costs)? No, according to two recent circuit decisions.

Most recently, in Symczyk v. Genesis Healthcare Corp.pdf., Case No. 10-3178 (3d Cir. Aug. 31, 2011), the plaintiff brought claims under the FLSA challenging the employer’s policy of deducting 30 minutes for meal periods and included the typical collective action allegations. Before the plaintiff had moved to certify the class, and before there were any opt-ins, the defendant made a Rule 68 offer of judgment for $7,500, plus attorney fees and costs to be determined by the court. Although the plaintiff did not accept the offer, the district court ultimately dismissed the claims on that basis, although it remanded state law claims. The plaintiff appealed.

The Third Circuit first tacitly acknowledge the validity of the two-step procedure for certification of claims under the FLSA often ascribed to the district court’s decision in Lusardi v. Xerox Corp., 975 F.2d 964 (3d Cir.1992). It then addressed the question of whether the case should have been dismissed due to the Rule 68 offer. It is not difficult to predict the court’s holding from the language it used, as it referred dismissively to the “tactic” of defendants of “picking off” lead plaintiffs and to “calculated attempts by some defendants to short-circuit the class action process.” Expressing concern that Rule 68 could “morph[] into a tool for the strategic curtailment of representative class actions,” the court placed limits on whether the offer of judgment could be effective. It held that the unaccepted offer did not moot the case and it ultimately remanded the case for the court to determine (1) whether a motion for conditional certification would have been timely, (2) whether such a motion should be granted and, (3) if so, whether other employees actually opt in.

The Ninth Circuit reached essentially the same conclusion three weeks earlier in Pitts v. Terrible Herbst, Inc.pdf, Case No. 10-15965 (9th Cir. Aug. 9, 2011). In that case, the defendant made the plaintiff an offer of judgment in an amount over ten times higher than the value of his individual claim before he had even moved for class certification. [OK, we admit we’re been a little dramatic – the claim was for $88 and the offer was $900.] Although the plaintiff did not accept the offer, the district court entered it as a judgment and dismissed the case, mooting the class allegations. Like the Third Circuit, the Ninth Circuit held that an unaccepted offer of judgment, even one made before a motion to certify a class had been filed, did not moot the case and it ordered the lower court to consider the certification issue.

One problem with both of these cases is their inherent assumption that class actions should be brought and that a defendant resisting them must have some devious purpose in mind. Both decisions pay little or no regard for the massive cost of defending even the weakest collective action claim and express little sympathy for the plight of employers trying to avoid the many tens of thousands of dollars in litigation expenses they will undoubtedly have to pay regardless of the merits of the case. The net result of these decisions is to negate the value of a Rule 68 offer of judgment to a representative plaintiff in an FLSA collective action, unless the plaintiff actually accepts it.

The Bottom Line: Many courts are hostile towards the use of Rule 68 offers to representative plaintiffs in class or collective cases.