On December 3, the U.S. Supreme Court heard oral argument in Genesis Healthcare Corp. v. Symczyk, 2012 WL 609478 (Jun. 25, 2012). As we have previously discussed, Genesis may determine a critical issue affecting class action litigation: whether a class representative may continue to pursue a class action where the defendant has offered to fully satisfy the class representative’s claims. See Can an Offer of Judgment Divest a Class Representative of Standing? Supreme Court to Decide from November 30, 2012.

We previously discussed the facts and procedural posture of Genesis. In short, Genesis answered the Fair Labor Standards Act (FLSA) complaint and made a Rule 68 offer of judgment, offering to pay $7,500 to the plaintiff to satisfy all of her claims. The plaintiff had not yet moved for certification of her collective action. She refused to accept the offer.

At oral argument, counsel for Genesis argued that the Third Circuit’s decision “deprives the Defendant of the ability to free itself from litigation even when it is willing to pay complete relief to the sole Plaintiff” and admit liability via an offer of judgment.

Justice Kagan pointed out, however, that “here, the plaintiff's individual claims have not been fully satisfied. She walked away with nothing. She walked away with no judgment, and she walked away with no $7,500. And the question is: How can it possibly be that her individual claim was moot?”

Counsel for Genesis responded that “if the defendant no longer wishes to contest liability and formally offers to pay all of the relief that the person could possibly win in any formal litigation, it has to be the case that the individual's interest is moot.” He went on to argue that if the defendant is “willing to give you everything to which you're entitled and you won't take it, then there's no reason we should continue to adjudicate your case because there's not really a controversy.”

Justice Ginsburg expressed concern about the purpose and intent of the opt-in provisions of Fair Labor Standards Act, asking: What do you do “when you have a governing statute that says that an employee may bring suit for and in behalf of himself and other employees similarly situated? . . . Mustn't you give a chance for the statutory provision to work, which you didn't. By filing [a Rule 68 offer of judgment] immediately, you didn't allow the normal process of inviting opt-ins to occur.”

In response, Genesis noted that: “The statute does not say, if a plaintiff files a case and alleges that other people are similarly situated, the case shall not be dismissed until the court has proceeded to conclusively determine the propriety of certification.”

Justice Sotomayor also expressed concern about the use of an unaccepted settlement offer to terminate a case, noting that: Rule 68 says — explicitly: “Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.”

In response, Genesis noted that the Rule 68 offer was admitted for a purpose other than to prove the validity or amount of the disputed claim. Rather, the offer was admitted to prove that there is no controversy between the parties.

Justice Alito then asked whether a hearing should be conducted to determine if the offer of judgment actually gives the plaintiff everything she could possibly recover under the complaint. Genesis responded yes — if the defendant makes an offer of judgment and files a motion to dismiss, suggesting that it provides complete relief, the court may hold a hearing under Rule 12(b)(6) to determine whether the claim has been mooted. For the plaintiffs, oral argument began with a discussion of whether plaintiffs waived the argument that an unaccepted Rule 68 offer of judgment cannot moot a case.

To the plaintiffs, Justice Roberts asked: “Why don't you just, if somebody comes forward, just take them in, go in, you get a check for $7,500 or whatever it is, you get attorney's fees, and you can do that as often as you want?”

In response, plaintiff’s counsel pointed out that (a) that didn’t happen here (plaintiff rejected the offer) and (b) that process would undermine the collective action aspect of the claim, essentially eliminating the ability of people to opt-in under the FLSA.

Finally, the solicitor general argued in favor of plaintiffs as an amicus, explaining that “Respondent has never been compensated for her individual damage claim, nor has she received a court judgment favorably adjudicating that claim. It follows that her individual claim remains live, as does this collective action.”

Justice Breyer analogized the situation to an employee that sues for his pay, despite the fact that his employer sent him his paycheck and the employee never cashed it. How can the employee “sue for his paycheck he didn’t cash?”

We will continue to follow this case as it continues toward final disposition in the Court.