On April 16, 2013, the United States Supreme Court in Genesis HealthCare Corp. v. Symczyk, 569 U.S. ___ (2013) (No. 11-1059), held that a trial court properly dismissed as moot a Fair Labor Standards Act (FLSA) overtime collective action where the employer had made an offer of judgment to the named plaintiff for all amounts she sought on her individual claim. However, the Supreme Court declined to resolve a circuit split regarding when and how an employer may "moot" an FLSA plaintiff's claims by offering full relief. Thus, though the decision will likely be of some benefit to employers located in certain appellate circuits, its overall import remains yet to be determined.
Background and Procedural History
In Genesis, a nurse employed by a Philadelphia nursing home filed an FLSA overtime suit alleging that her employer failed to pay her all wages she was due. The FLSA allows a worker with such a complaint to sue, not only for herself, but also for her "similarly situated" co-workers, in what is called a "collective action." An FLSA collective action bears some similarity to a class action.
Before the plaintiff in Genesis filed a motion for conditional class certification, the employer served the plaintiff with a Rule 68 offer of judgment for $7,500, which represented full relief for the plaintiff's individual claim. The plaintiff ignored the offer, and it expired. The defendant then moved to dismiss the lawsuit on the basis that the plaintiff's claim was moot because there was no longer any actual controversy.
Under the Third Circuit precedent that governed the Genesis matter, a plaintiff cannot keep a claim alive by rejecting an offer of judgment that provides full relief. The district court therefore dismissed the plaintiff's claim as moot, and dismissed her collective action.
On appeal, the Third Circuit agreed that the plaintiff's individual claim was rendered moot, but nonetheless held that the collective action was not moot since the plaintiff had an interest in representing unnamed potential class members. The employer sought review by the Supreme Court.
The Supreme Court Decision
The Supreme Court, in a 5-4 decision written by Justice Thomas, held for the employer. Chief Justice Roberts, and Justices Scalia, Kennedy and Alito joined Justice Thomas' majority opinion. Justice Kagan dissented, and was joined by Justices Ginsburg, Breyer and Sotomayor.
The majority declined to rule on the underlying issue of whether the unaccepted offer of judgment actually mooted the plaintiff's claim. The appellate circuits are split on that question, but the plaintiff had conceded the point in both the district court and the Court of Appeals for the Third Circuit; thus, the plaintiff could not properly raise the issue for the first time before the Supreme Court. The Third Circuit's position on the mootness issue thus remains the law in that circuit, as well as in the Second, Fourth, Sixth and Seventh Circuits (and possibly in the Fifth and Eleventh Circuits as well)—albeit with some key differences among these circuits.
The majority concluded that because the plaintiff's claim had become moot, the plaintiff could not serve as a representative of unnamed putative plaintiffs. Her collective action lawsuit was properly dismissed for lack of subject matter jurisdiction. The majority noted that Rule 23 class actions are fundamentally different from FLSA collective actions, and that the Rule 23 cases relied upon by the plaintiff were inapposite.
Justice Kagan's strong dissent maintained that the Third Circuit's position—that an unaccepted offer of judgment that provides complete relief moots the underlying claim—was in error, and that as a result, the majority opinion was based on a "bogus premise" and addressed a situation that would not be repeated in other cases. Justice Kagan cautioned lower courts to reject or abandon the Third Circuit rule and, thereby, render the majority opinion a nullity.
What This Decision Means for Employers
Employment lawyers eagerly awaited the Supreme Court's decision, primarily because they anticipated that the Supreme Court would resolve the circuit split regarding the effect of an unaccepted offer of judgment that provides complete relief. However, the majority provided no clarity on that issue.
Still, Genesis clarifies that courts must dismiss collective actions where the named plaintiff's claim is moot and no class has been certified. In circuits that permit an employer to moot an individual plaintiff's claim, Genesis will be useful to employers who seek to "pick off" the named plaintiff's claims at an early stage in the proceeding.
As with many Supreme Court decisions, the overall significance of the Genesis case will become more apparent over time. The majority put significant weight on the fact that the plaintiff had yet to file a conditional certification motion, and that there were no other plaintiffs involved in the suit. It is unknown what would happen if the named plaintiff's claim is mooted after the filing of a conditional certification motion, or after other plaintiffs opt into the suit.
The dissent compared the unaccepted offer of judgment to an unaccepted settlement offer, and argued strongly that neither moots a claim. Going forward, defense lawyers seeking to moot a claim may want to consider making an unconditional tender of the full amount of money sought by the plaintiff, as opposed to a formal offer of judgment. An unconditional tender, such as by sending a cashier's check for that amount to the plaintiff's counsel, might be viewed differently than a settlement offer.
Finally, it is possible that the true import of Genesis does not involve the mootness issue at all, but rather, may be found in the majority's statement that "there are significant differences between certification" of a collective action and a Rule 23 class action. That language may prove to be an effective tool for employers seeking to avoid collective action certification on the basis that the claims (or damages claims) of the individual opt-in plaintiffs are too different to qualify for collective treatment.
For Further Information
If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.