On April 16, 2013, the Supreme Court of the United States ruled that a defendant employer’s settlement offer to a plaintiff mooted the plaintiff’s claim and prevented her from leading a collective action for unpaid wages.  The controversial ruling by a sharply divided Court suggests employers may be able to avoid collective actions under the Fair Labor Standards Act by “picking off” the named plaintiff through early action.

The case was brought by Laura Symczyk, a nurse complaining of unpaid wages under the Fair Labor Standards Act.  She styled the case as a collective action in which she sought relief for herself and all persons similarly situated.  At the same time the employer, Genesis Health Care Corp. (“Genesis”), answered the lawsuit, it made a Rule 68 offer of judgment which offered full damages plus reasonable attorneys’ fees and costs.  The settlement offer stated it would expire at the end of 10 days, at which time it would be deemed withdrawn.  Symczyk did not respond to the offer, instead letting it expire.  After the plaintiff let the offer lapse, Genesis moved the Court to dismiss the suit, contending the plaintiff’s claim was mooted by the offer of full relief. The trial court agreed and dismissed the entire suit, noting that no other plaintiff had yet joined.  The United States Court of Appeals for the Third Circuit reversed and remanded, holding that while Symczyk’s claim was mooted, the process had improperly prevented the collective action from reaching the class certification stage.  The Supreme Court of the United States disagreed and affirmed the ruling of the district court.

The Supreme Court’s opinion, authored by Justice Thomas, did not resolve the circuit split as to whether an unaccepted offer of full relief to a class representative moots the representative’s claim because the issue was not technically before the Court.  It did rule, however, that where the law of the circuit holds the claim is mooted, the plaintiff can no longer proceed on behalf of the class.   Where, as here, no other members have opted into the class at the time of the offer of settlement, the entire suit is mooted along with the plaintiff’s individual claim.

Justice Kagan filed a bold dissent, joined by three other justices, rejecting the fundamental premise of the majority’s opinion—that an unaccepted offer of settlement can moot a plaintiff’s claim.  An unaccepted settlement offer, Justice Kagan contends, is a legal nullity, like an unaccepted offer to contract, and does not deprive a plaintiff of her individual claim.  Justice Kagan chastised the majority for injudiciously ruling on a case with such narrow facts and limited utility,and suggests the Court would have more usefully addressed the issue of whether the plaintiff's claim could be mooted by an unaccepted offer of settlement. 

This case is further evidence of the Supreme Court’s hostility to class action lawsuits.  However, the Court did recognize the fundamental differences between traditional Rule 23 class action litigation and collective actions brought under the Fair Labor Standards Act.  Justice Thomas specified that this ruling is inapplicable to class actions brought outside the FLSA. 

As a practical matter, employers cannot count on avoiding collective actions simply by making an offer of settlement to the named plaintiff.   Many fact-specific issues in this case led the Court to its conclusion—the most notable of which is the fact that no other plaintiff had yet joined the lawsuit.  Second, the Third Circuit had held that an unaccepted offer of settlement can moot a plaintiff’s claim.  The Court conspicuously did not address the propriety of this ruling.  Many other circuits would not reach this same result, especially when the offer was not even declined, but merely expired.  Nevertheless, a Rule 68 offer can be an effective strategic measure in eliminating collective actions if the offer is made pre-certification.  By satisfying the named plaintiff and potentially limiting the attorneys’ fees recoverable by counsel, a defendant may stave off a full class onslaught.  Savvy plaintiffs may also try to avoid this result by seeking earlier class certification, even before sufficient discovery can reveal a potential damages amount for the named plaintiff, or by adding additional claims under state or federal law.