Supreme Court Spurns Rule 68 “Pickoffs,” Kind of, in Class Litigation

by BakerHostetler

OK, maybe it’s not a silver bullet, but at least there might be a tin one.

Employment class action litigation is difficult, time-consuming, and expensive even if the employer is absolutely right. But what can an employer do to terminate it before being forced to defend a case and incur the related attorneys’ fees and internal costs?

Rule 68 has frequently been touted as a shortcut, but that Rule has proven to be an unreliable ally. Three years ago, the Supreme Court held in Genesis Healthcare Corp. v. Symczyk, 564 U.S. ___ (2013), that an unaccepted offer of judgment to the class representative could moot the class claims but, significantly, assumed for the sake of argument that an unaccepted offer of judgment would moot claims in general. The dissent, authored by Justice Kagan, highlighted this obvious flaw and openly disagreed with the premise that an unaccepted offer of judgment meant much of anything. We blogged about that decision on April 16, 2013, and noted that the decision might have limited impact due to this inherent limitation. Over the next three years, courts skeptical of offers of judgment would openly state that they agreed with the dissent, something that was not as inapt as it might sound on the surface, as they were actually saying that they disagreed with the underlying premise of the majority. Put another way, many courts found that an unaccepted offer of judgment would NOT moot a case, and thus the majority opinion was irrelevant. 

The entire debate focused on Rule 68, but the language is not terribly helpful. Rule 68 provides that a defendant may make an offer of judgment, but it says little about what happens, apart from the issue of costs, if the offer is rejected. All Rule 68(b) says is that the offer is withdrawn and is inadmissible except in connection with the awarding of costs.

“(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.”

As for those costs, the Rule provides that if the ultimate judgment is “not more favorable than the unaccepted offer,” the plaintiff must pay the costs incurred after the offer. Rule 68 does not contain a provision specifically authorizing dismissal.

Earlier this year, on January 20, 2016, the Court addressed this issue again, in Campbell-Ewald Co. v. Gomez, Case No. 14-857. Not surprisingly, as Justice Ginsberg authored the decision and had sided with Justice Kagan in Symczyk, it fell along the lines of the Symczyk dissent. The Court found that an unaccepted offer of judgment would not justify dismissal of the underlying case under Rule 68. Three of the justices, including the late Justice Scalia, dissented, but, of course, these were the dissenters, and one of them is now gone. In a turn of play that echoes the dissent in Symczyk, however, the dissent raised the valid point that if the plaintiff has been offered full relief completely independent of Rule 68, there is no “case or controversy” and there is nothing that a federal court can constitutionally decide.

The reality is that some judges like class actions and are willing to tolerate their many warts and abuses in the name of doing “rough justice.” Others are warier of whether class litigation might violate due process or force defendants to settle due to the tremendous cost and risk it presents. That difference of opinion spills over into Rule 68 debates.

The decision in Campbell-Ewald will likely not end the debate. It does seem to close the door on the use of Rule 68 to end class litigation, but does not resolve the “case or controversy” issue raised in the dissent. Most cases will continue to turn on whether the individual judge believes class actions confer a societal benefit or defendants should be forced to defend cases when, for whatever reasons, they have offered the named plaintiff full relief.

Many commentators have weighed in on both sides of the question, but offers of judgment cannot be viewed as a surefire means to cut off even meritless class litigation. The case or controversy requirement provides a foothold, but employers and others should push for a change in the civil rules that gives them the right to address putative class claims in a way that prevents them from becoming cost tsunamis regardless of merit.

The bottom line: Rule 68 offers of judgment are not a panacea for class claims but may still be a tool in the employer’s kit to present to courts concerned about case or controversy requirements.

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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