Supreme Court Ruling Nixes FLSA Collective Action

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In a 5-4 decision issued on April 16, 2013, the U.S. Supreme Court reversed the U.S. Court of Appeals for the Third Circuit and held that an unaccepted Rule 68 offer of full relief to a named plaintiff extinguished a putative wage-and-hour collective action. The Court declined, however, to answer the question of whether the offer actually mooted the individual claim, leaving a circuit court split on this issue intact. Consequently, whether an employer facing a Fair Labor Standards Act (FLSA) collective action can avoid the prospect of hundreds or thousands of additional plaintiffs opting into the action by offering the plaintiff full relief will depend on the law in the employer’s jurisdiction.

In Genesis HealthCare Corporation v. Symczyk, the Court affirmed the district court’s dismissal of a former nurse’s suit alleging that her employer’s automatic meal break deduction policy had violated the FLSA. The Court ruled that after the named plaintiff’s claim became moot—a finding by the lower courts that it did not disturb—her claim on behalf of similarly situated employees also became moot because she had no personal interest in the case.

Genesis, owner of the Pennypack Center, where the plaintiff had worked as a registered nurse, served her a $7,500 offer of judgment, plus attorneys’ fees, costs, and expenses. When the plaintiff did not respond to the offer, Genesis filed a motion to dismiss for lack of subject-matter jurisdiction. The parties did not dispute that the Rule 68 offer fully satisfied her individual claim.

Applying “well-settled mootness principles,” Justice Clarence Thomas, writing on behalf of the majority, stated that the mootness of the plaintiff’s individual claim deprived her of any personal interest in representing others in the action. “The mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied,” he wrote. 

Significantly, the Court found that the plaintiff did not retain a statutorily created interest in representing other similarly situated employees. Justice Thomas contrasted class actions, where a putative class acquires an independent legal status once certified under Rule 23, with collective actions: “Under the FLSA,” he wrote, “‘conditional certification’ does not produce a class with an independent legal status, or join additional parties to the action.”

The Court also declined to rely on a line of “relation-back” cases developed in the Rule 23 context. These cases allow a district court to relate certification back to the filing of the complaint when a named plaintiff’s claim is so “inherently transitory” that it expires before the court has a chance to rule on certification. Justice Thomas explained that the rationale behind these cases did not apply to the plaintiff’s expired claim because she had sought only monetary damages and not injunctive relief for ongoing conduct.

Finally, the Court rejected the plaintiff’s argument that Rule 68 allows employers to “pick off” named plaintiffs and thwart the collective action process. Again, the Court found that her reliance on a Rule 23 case in which plaintiffs possessed an ongoing, economic stake in shifting attorneys' fees and costs to others was not pertinent.

The Court did not take on the issue of whether a Rule 68 offer that fully satisfies an FLSA named plaintiff’s claim is sufficient by itself to render that claim moot because that issue was not before the Court. In a footnote, however, Justice Thomas offered that “nothing in the nature of the FLSA actions precludes satisfaction—and thus the mooting—of the individual’s claim before the collective-action component of the suit has run its course.”

In a spirited dissent, Justice Elena Kagan chastised the majority for resolving an “imaginary question,” based on a faulty assumption made by the lower courts. “What if the plaintiff’s individual claim here never became moot,” she asked, and challenged readers of the dissent to identify when, in fact, it had. According to Justice Kagan, the unaccepted settlement offer was a legal nullity, meaning that the plaintiff’s claim was “alive and well” when the district court dismissed her suit. “Feel free to relegate the majority’s decision to the furthest reaches of your mind[,]” Justice Kagan wrote. “The situation it addresses should never again arise.”

Because the Supreme Court did not decide whether Genesis’ offer actually mooted the plaintiff’s individual claim, the viability of using Rule 68 offers of judgment as a means of thwarting large collective actions will vary from circuit to circuit.

On May 6, 2013, Ballard Spahr will hold a webinar, “How Supreme Court's Decision Dismissing Class Claim Affects FLSA Collective Actions and Rule 23 Class Actions,” from 12:00 p.m. to 1 p.m. ET. More information on the webinar and a link to register can be found here.

For further information about Ballard Spahr’s experience in defending employers against class and collective actions, please contact David S. Fryman at 215.864.8105 or fryman@ballardspahr.com, Alexandra Bak-Boychuk at 215.864.8123 or bakboychuka@ballardspahr.com, or any member of the firm’s Labor and Employment Group.

Topics:  Collective Actions, FLSA, Genesis HealthCare, Genesis Healthcare Corp. v. Symczyk, Mootness, Rule 23, Rule 68, SCOTUS

Published In: Civil Procedure Updates, Constitutional Law Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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