In Genesis HealthCare Corp. v. Symczyk (11-1059 here), plaintiff filed a FLSA collective action on behalf of herself and other persons similarly situated claiming that 30 minutes were improperly deducted for meal breaks each day when employees actually worked. Genesis answered the complaint and immediately served an offer of judgment ($7,500 for unpaid wages, plus “such reasonable attorneys’ fees, costs, and expenses … as the Court may determine”) under Federal Rule of Civil Procedure 68 before anyone else opted-in to the suit. The offer was not accepted within 10 days thus was deemed withdrawn. Genesis filed a motion to dismiss asserting the offer provided Symczyk complete relief on her individual damages claim. The District Court agreed and held that the unaccepted offer of judgment mooted her entire suit. The Third Circuit reversed in part – holding that although the offer fully satisfied her individual claim (“whether or not such an offer is accepted, it generally moots a plaintiff ’s claim” in the Third Circuit), the Court held that her collective action was not moot.

After assuming, without deciding, that Symczyk’s individual claim was moot (resulting in a blistering dissent), yesterday the Supreme Court (5-4) held “… that respondent has no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.” In coming to this conclusion, the Supreme Court stated:

  • “While the Courts of Appeals disagree whether an unaccepted offer that fully satisfies a plaintiff’s claim is sufficient to render the claim moot, we do not reach this question, or resolve the split, because the issue is not properly before us.”
  • While the FLSA authorizes an aggrieved employee to bring an action on behalf of himself and “other employees similarly situated,” [], the mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied.”
  • “Some courts maintain that an unaccepted offer of complete relief alone is sufficient to moot the individual’s claim. [] [the Third and Seventh Districts]. Other courts have held that, in the face of an unaccepted offer of complete relief, district courts may ‘enter judgment in favor of the plaintiffs in accordance with the defendants’ Rule 68 offer of judgment’ [] [the Second and Sixth Circuits].”
  • “… nothing in the nature of FLSA actions precludes satisfaction—and thus the mooting—of the individual’s claim before the collective-action component of the suit has run its course.”

In New York, simply serving a Rule 68 offer of judgment for all damages owed and agreeing to pay reasonable fees and costs is not enough to moot a FLSA case. The Second Circuit in McCauley v. Trans Union LLC, 402 F.3d 340 (2nd Cir. 2005) held that “… the way to a better resolution [is] entry of a default judgment against Trans Union for [all damages] plus reasonable costs.” Such a judgment would remove any live controversy from this case and render it moot, and “a default judgment would … have no preclusive effect in other litigation.” Unlike a settlement offer, however, “the default judgment would be a matter of public record …”

Other Circuits follow the Second Circuit’s approach including the Fourth, Sixth, and Eighth Circuits. Simmons v. United Mortgage & Loan Investment, LLC, 634 F.3d 754, 765-766 (4th Cir. 2011) (failure to offer entry of a judgment “prevented the mooting” of claims); O’Brien v. Ed Donnelly Enterprises, Inc., 575 F.3d 567, 574 (6th Cir. 2009) (requiring a defendant to offer an entry of judgment in order to moot a claim); Hartis v. Chicago Title Ins. Co., 694 F.3d 935, 949 (8th Cir. 2012) (“[j]udgment should be entered against a putative class representative on a defendant’s offer of payment where class certification has been properly denied and the offer satisfies the representative’s entire demand for injuries and costs of the suit”).

The Seventh and the Federal Circuits, however, hold that an offer to provide a plaintiff with the full relief she seeks moots a claim, whether or not the defendant offers to embody the settlement in a judicial judgment. Damasco v. Clearwire Corp., 662 F.3d 891 (7th Cir. 2011) (“[o]nce the defendant offers to satisfy the plaintiff’s entire demand, there is no dispute over which to litigate); Samsung Electronics Co. v. Rambus, Inc., 523 F.3d 1374, 1377 (Fed. Cir. 2008) (the offer of a full settlement moots a claim).

The Supreme Court also made important Rule 23 class versus FLSA collective action distinctions in Symczyk, such as:

  • “ … Rule 23 actions are fundamentally different from collective actions under the FLSA …” “… [T]here are significant differences between certification under Federal Rule of Civil Procedure 23 and the joinder process under §216(b).”
  • Although “Respondent contends that she has a sufficient personal stake in this case based on a statutorily created collective-action interest in representing other similarly situated employees under §216(b)[,] … [while] a putative class acquires an independent legal status once it is certified under Rule 23[,] [u]nder the FLSA, by contrast, ‘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 …”
  • “Whatever significance ‘conditional certification’ may have in §216(b) proceedings, it is not tantamount to class certification under Rule 23.”

These pronouncements should take the steam out of plaintiffs’ arguments that individual arbitration agreements somehow prevent them from vindicating some “substantive right” to proceed with FLSA claims on a collective basis in federal court. Many courts have already rejected the argument that the right to bring a collective action is a non-waivable substantive right under the FLSA. Rather, a collective action is merely a procedural method for pursuing a FLSA overtime claim, and not a free-standing cause of action or substantive right. The Supreme Court’s statements in Symczyk that Rule 23 actions are fundamentally different from FLSA collective actions, and conditional certification does not produce a class with an independent legal status, support this procedural versus substantive distinction.