In Genesis Healthcare Corp. v. Symczyk, No. 11-1059, 569 U.S. ___ (Slip Op. April 16, 2013), the U.S. Supreme Court held, in yet another 5-4 decision, that the defendant successfully executed a judicial “pick off” by submitting a Federal Civil Rule 68 offer of judgment to the individual plaintiff in a collective action brought under the Fair Labor Standards Act of 1938 (“FLSA”).
In the Genesis Healthcare case, the plaintiff, a former employee, filed an FLSA action on her own behalf and on behalf of “other employees similarly situated.” The plaintiff alleged that she (and others) had performed compensable work during meal breaks, and that the defendant employer therefore had improperly deducted that time. The employer filed an answer to the complaint and also served a Federal Civil Rule 68 offer of judgment in the amount of $7,500 in unpaid wages, together with costs, expenses and fees as determined by the court. The parties agreed that the offer of judgment represented complete relief on plaintiff’s own FLSA claim.
FLSA collective actions are often thought of as hybrid class actions. In Genesis Healthcare, the Court noted “significant differences” between class actions maintained under Federal Civil Rule 23 and “collective actions” under 29 U.S.C. §216(b). As of the time of the answer and offer of judgment, the plaintiff had alleged a collective action in the complaint, but had yet to move the district court for conditional certification. Consequently, a court-approved FLSA notice had not been sent to other employees who, under the collective action procedure, would be given the opportunity to “opt in” and thereby join the case.
Plaintiff did not accept the offer of judgment. The employer nevertheless moved the district court to dismiss the plaintiff’s claim for lack of subject matter jurisdiction on the ground that the offer fully satisfied plaintiff’s claim and thereby rendered it moot and non-justiciable. Plaintiff opposed dismissal, asserting that the individual offer of judgment was an improper attempt to “pick off” a plaintiff that purported to also represent other employees. The district court dismissed the plaintiff’s claim for lack of subject matter jurisdiction. The Third Circuit reversed, holding that an offer of judgment, while mooting the individual’s claim, could not “pick off” the plaintiff in an FLSA collective action prior to the district court’s determination of conditional certification.
The Supreme Court held that plaintiff’s claim was moot, and therefore the collective action was also moot. The Court reasoned that the offer of judgment, while having the “collateral effect of foreclosing unjoined claimants from having their rights vindicated in [plaintiff’s] suit,” would not impair the right of other putative opt-in claimants “to vindicate their rights in their own suits.”
Interestingly, the Court did not actually resolve the question of whether an unaccepted offer of judgment can involuntarily moot the claim of an individual, and the Court noted in this regard that the Circuits are split on the issue. (It appears that an unaccepted offer of judgment can be used to moot claims in at least the Third, Sixth and Seventh Circuits.) Rather, the Court noted that neither of the parties challenged that premise. This strange posture led the dissent to sharply criticize the five-Justice majority for deciding an “imaginary question” that is “founded …. on an unfounded assumption.” The dissenting Justices would conclude that an unaccepted Rule 68 offer of judgment is withdrawn; i.e., it cannot be used offensively by the defendant to deprive the court of subject matter jurisdiction.
The decision of the Supreme Court in Genesis Healthcare does not answer any of the questions about whether, or when, or to what extent defendants facing collective (or even class action) claims in federal court might be able to “pick-off” the lead plaintiff. The dissent cautions: “don’t try this at home.” But the decision certainly will fuel those strategies. One immediate effect of Genesis Healthcare will be to front-load FLSA collective actions with multiple plaintiffs. For companies facing FLSA collective actions, the decision – which seemingly renders such actions even more individual and less representative – will impact arbitration, discovery and other proceedings.