U.S. Supreme Court Grants Review on Important Mootness Issue

by Proskauer - Class & Collective Actions
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[author: Joshua F. Alloy]

The U.S. Supreme Court recently granted review in a Fair Labor Standards Act (FLSA) case in order to decide whether a case becomes moot, and thus beyond the judicial power of Article III of the United States Constitution, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff’s claims. The Court’s eventual answer to that question may have a significant impact not only in FLSA cases, but in Rule 23 class actions as well. We previously discussed this issue here: http://classactions.proskauer.com/2011/09/01/decapitating_class_actions/

The FLSA establishes nationwide rules related to minimum wages, maximum hours, and overtime pay. Importantly, the FLSA provides that an employee may file a putative collective action against his or her employer seeking double damages and attorney’s fees for FLSA violations. Congress established a system whereby other similarly situated employees may affirmatively opt in to the case. If the named plaintiff establishes to the district court’s satisfaction that his or her claims present issues common to other employees, the district court will conditionally certify the case and allow judicial notice of the case to be sent to other similarly situated employees, along with an opportunity to opt-in as plaintiffs.

In the case now before the Supreme Court (Genesis HealthCare Corp. v. Symczyk, No. 11-1059), a nurse formerly employed by a large operator of long-term care facilities filed a putative collective action against her former employer, claiming it had a nationwide unlawful policy of requiring nurses to work through their lunch breaks. However, before the plaintiff could file a motion seeking conditional certification, the employer served a Rule 68 offer of judgment that would have provided her with complete relief. Although the plaintiff declined the offer of judgment, the United States District Court for the Eastern District of Pennsylvania granted the employer’s motion to dismiss, finding that the offer of judgment had mooted the case.

The United States Court of Appeals for the Third Circuit reversed. Citing decades-old and closely decided Supreme Court precedent addressing mootness issues in the Rule 23 class action context, the appellate court found that the case was not moot because an employer should not be allowed to “pick off” a named plaintiff in order to defeat putative collective actions under the FLSA. Instead, the named plaintiff should be given a reasonable opportunity to seek conditional certification, which, if granted, would supposedly give the named plaintiff a right to represent others that could not be mooted by the satisfaction of the named plaintiff’s individual claim.

The employer petitioned for Supreme Court review. Acting as counsel for the Chamber of Commerce of the United States of America, the American Health Care Association, the National Federation of Independent Business, and the National Center for Assisted Living, Proskauer filed an amicus brief in support of the employer’s petition emphasizing the mootness issue’s importance to employers throughout the United States. (A copy of the brief can be accessed here: http://www.scotusblog.com/case-files/genesis-healthcare-corp-v-symczyk) In doing so, we explained that the Third Circuit’s decision would harm employers who are presently inundated by a tidal wave of FLSA litigation, exemplified by the fact that, in the past decade alone, the number of FLSA suits filed annually has grown by almost 300 percent. Because the FLSA is a strict-liability statute that requires courts to award attorney’s fees to prevailing plaintiffs, and because the scope of the FLSA is subject to considerable uncertainty, we explained that employers that believe they have complied with the statute in good faith are often forced to settle unmeritorious suits rather than face the risk of catastrophic judgments. Therefore, the Third Circuit’s decision deprived employers of a reasonable means to avoid burdensome and protracted FLSA litigation, based primarily on the Third Circuit’s policy judgment that further discovery and litigation might motivate others to join a suit being prosecuted by counsel who no longer represents a client with a personal stake in the case’s outcome.

On June 25, 2012, the Supreme Court granted the employer’s petition for review. The case will be briefed and argued on the merits this coming fall.

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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