Genesis: A Unicorn, or the Beginning of a New Tactic? Supreme Court Holds Employers Can "Pick Off" a Named Plaintiff and Defeat a FLSA Collective Action with an offer of Judgment, but Leaves Open If All Employers Can Employ This Strategy
By a tight five-to-four decision, the United States Supreme Court's Genesis Health Care Corp. v. Symczyk decision provides employers a method to "pick off" the lead plaintiff in an FLSA collective action using a Federal Rule of Civil Procedure 68 offer of judgment and by doing so, take out the remaining collective action. For reasons we will explain in a bit, however, the Court merely "assumed" -- without deciding -- that an unaccepted Rule 68 offer of judgment that offers complete relief moots the named plaintiff's individual claim and, in the absence of any other claimant having opted into the action, the individual plaintiff lacks any personal interest in representing others in the case. Because the Court was unwilling to resolve the predicate issue as it was anticipated it would, however, there remains a split among the circuit courts of appeal as to the effect of the Rule 68 offer of judgment under this scenario. As a result, the four dissenting justices argued, the decision “aids no one, now or ever” and should simply be forgotten.
Because the circuits are split on the mootness issue, employers should take Genesis for what it is: A potential weapon to stop frivolous wage/hour cases before they become expensive collective actions and further indication of the Supreme Court's efforts to limit the ability to bring class and collective actions – at least in those Circuits -- the Third, Fourth, Seventh (and perhaps the Fifth, which appears to be leaning this way) – that already have held that an unaccepted offer of judgment moots an individual plaintiff's claims. Unfortunately for those employers in Ohio, the Sixth Circuit, along with the Second, has gone the other way, rendering this strategy useless here – until the Supreme Court ultimately decides to actually resolve the split.
The Back Story: This case originated when respondent Laura Symczyk ("Symczyk") filed this case on behalf of herself and "all other persons similarly situated" as a collective action under the Fair Labor Standards Act ("FLSA") against her former employer, the petitioners, alleging the company's automatic meal break deduction policy violated the FLSA because it failed to pay employees for compensable work. While Ms. Symczyk purported to bring the case as a collective action, rather than a single-plaintiff lawsuit, she remained the sole plaintiff.
When the petitioners answered the complaint, and before Symczyk could move for conditional certification, they served Symczyk a Federal Rule of Civil Procedure Rule 68 offer of judgment and offered her $7,500 for her alleged unpaid wages, "reasonable attorneys' fees, costs, and expenses" as the Court would determine. The petitioners gave Symczyk ten days to respond, and when she did not, petitioners filed a motion to dismiss for lack of subject matter jurisdiction arguing they had offered Symczyk complete relief on her individual damages claim and she no longer had a personal stake in the outcome of the case. Symczyk argued in response that the petitioners were trying to "pick off" the named plaintiff before the collective action could play out.
The District Court found that because no other individuals had joined the suit and the Rule 68 offer of judgment fully satisfied Symczyk's individual claim, Symczyk's claim was moot and it dismissed her suit for lack of subject matter jurisdiction.
On appeal, the Third Circuit reversed. In holding that the case was not moot, the Third Circuit explained that the defendants' attempts to "pick off" the named plaintiff with a Rule 68 offer could short circuit the collective action process and frustrate the goals of collective actions. The Third Circuit remanded the case to allow Symczyk to seek conditional certification.
The Supreme Court's Decision: The Supreme Court overturned the Third Circuit. While most waiting for this decision expected the Supreme Court to resolve the issue of whether an unaccepted offer of judgment under Rule 68 that fully satisfied a plaintiff's claim renders a claim moot, it did not. While recognizing this is an issue on which the circuit courts remain split, the Court refused to decide this significant issue. Rather, the Court chose to "assume" Symczyk's individual claims were moot because she had conceded the point at the district court level and had not filed a cross-petition challenging it. The majority then determined that Symczyk had no "personal interest" left in the case to represent the other employees who had failed to join the suit, and therefore had no other "continuing interest to preserve her suit".
As the Court explained:
Under the FLSA,...,"conditional certification" does not produce a class with an independent legal status, or join additional parties to the action. The sole consequence of conditional certification is the sending of court-approved written notice to employees,..., who in turn become parties to a collective action only by filing written consent with the court, § 216(b). So even if respondent were to secure a conditional certification ruling on remand, nothing in that ruling would preserve her suit from mootness.
Although the Court upheld the dismissal in Genesis by assuming mootness, its refusal to settle the circuit court split leaves the viability of the Rule 68 strategy up in the air.
While the majority also weighed in on a couple of other points, the mootness issue is the main one that sent four of the Justices into dissent. The dissenting justices argued that a mere offer to pay off a litigant, when that offer simply went unaccepted, is not enough to end a lawsuit. Since the majority proceeded on the false assumption that that satisfied the federal court rule governing such payment offers, the remainder of the Court majority’s analysis was beside the point, and the situation would not recur in any other case, the dissenting opinion asserted.
Justice Kagan's dissent, which is dripping with sarcasm, is an entertaining read and is one I am sure we will see cited down the road as this issue plays out in the lower courts, especially as she notes: "The Court today resolves an imaginary question based on a mistake the courts below made about this case and others like it."
- Some employers Have a New Tool to Defeat Single-Plaintiff Collective Actions: While the dissenting opinion hypothesizes that a factual scenario like the one presented in Genesis is essentially a unicorn as resolves an imaginary question that does not and will never exist, this decision potentially gives employers, except those in the Second and Sixth Circuits, a tool to stop a lawsuit at the starting line. If an employer can stop a purported collective action prior to the notice stage, it can stop a plaintiff's lawyer from identifying other class members through the notice process and effectively kill the suit before it gets out of the gate.
- Genesis Extends the Supreme Court's Growing Intolerance for Class Actions to Include Collective Actions Brought Under the FLSA. This case takes its proper place among Wal-Mart v. Dukes, Amgen v. Connecticut Retirement Plans & Trust Funds and Comcast Corp v. Behrend as further narrowing certification standards under Rule 23, and now in the FLSA collective action context.
- The Court's Clear Distinction Between FLSA Collective Actions and Opt-Out Class Actions Under Rule 23 Will Be Cited in Many Case to Come. It is also worth noting that the majority noted for the first time since its 1989 Hoffmann-LaRoche v. Sperling decision that "Rule 23 class actions are fundamentally different from collective actions under the FLSA." Unlike in a Rule 23 action, conditional certification of an FLSA collective action does not produce a class with an independent legal status, the decision said. This part of the decision is important because the Court has signified its stance that collective actions are inherently different from class actions. We can expect to see Genesis cited in hybrid class/collective action cases by employers seeking to separate the two into separate actions.