The Tampa Bay Buccaneers had a tough week last week. It wasn’t just their loss to the Detroit Lions. Defeats on Sundays are something with which the Bucs have grown accustomed. Rather, last week the 11th Circuit Court of Appeals held that the Bucs’ attempt to have an adverse judgment against themselves would not end a class action lawsuit they faced.
Why is it that the Bucs can’t even succeed in losing a lawsuit? It has a lot to do with the intricacies of Federal Rule of Civil Procedure 68, and dual standing that a class representative carries under Federal Rule of Civil Procedure 23.
In short, the Bucs made a Rule 68 offer of judgment for full relief to a class representative in a Telephone Consumer Protection Act putative class action in an attempt to moot the case. The 11th Circuit in Stein v. Buccaneers Limited Partnership held that the case could nevertheless proceed as a class action. A post earlier this week from our colleagues on Seyfarth Shaw’s Workplace Class Action blog explains the details, and makes the point that employers defending any sort of workplace class action need to be cognizant of this ruling.
The ruling bears further examination for its potential effects on wage-hour cases. Trying to moot a wage-hour collective or class action is often an attractive strategy for an employer. Many of the cases involve relatively low potential liability to the named plaintiff(s) and/or class representative(s), but involve significant exposure when that potential liability is multiplied by the number of current and former employees who might participate in the class or collective action. By offering complete relief to a named plaintiff in an FLSA collective action, an employer can cause a court to hold that no case or controversy exists, and thus a court loses jurisdiction of a case and must dismiss it before it blossoms into a collective action. The Supreme Court’s Genesis Healthcare Corp.’s ruling makes this clear, and so does a post-Genesis Fifth Circuit ruling.
But the Stein case illustrates the limits to Genesis in wage-hour cases, and raises the question of whether employers should ever use Rule 68 at all in the wage-hour context. A simple offer of complete relief may be the better move.
First, in Stein, the 11th Circuit joined the 3rd, 5th, 9th, and 10th Circuits in holding that a Rule 68 offer of full relief to a class representative does not moot a Rule 23 class action. This is significant because so many wage-hour cases are now filed under state wage-hour laws, and use Rule 23 to attempt to obtain a class action. (The 7th Circuit has held to the contrary in Damasco v. Clearwire Corp., but its holding doesn’t help employers much because it further held that a Rule 68 offer won’t moot a class action if a motion for class certification is filed first, even if that motion is a perfunctory one on which briefing is stayed. Accordingly, careful plaintiffs’ lawyers in the 7th Circuit now file Damasco motions for class certification at the same time they file the complaint, even though briefing on that motion won’t occur usually for more than a year later.) Thus, in many circuits, an offer of complete relief under Rule 68 won’t moot a case in a wage-hour action that includes a Rule 23 claim under state law. It only potentially may work in a collective action brought solely under the FLSA.
Second, Stein shows that, even in an FLSA collective action context, Rule 68 may be a poor vehicle for an employer to make an offer of full relief. Under Rule 68, an offer not accepted within 14 days is considered withdrawn. Thus, the 11th Circuit held in Stein, an unaccepted offer no longer moots a claim after 14 days because it technically no longer exists. Rule 68 also requires that a defendant-employer take a judgment against itself. This causes two problems: (a) taking an adverse judgment could complicate matters for a company in future lawsuits or DOL investigations, in government contracting, or in obtaining financing or completing other types of transactions; and (b) when a judgment is entered against an employer under the FLSA, the plaintiff is considered to have prevailed in the case, and thus is entitled to an award of reasonable attorneys’ fees for which an employer is liable. If the offer is made early, these fees may not be significant. But many employers find that, in this context, some (but not all) plaintiff’s attorneys seem to have a “heavy pencil” when completing their time sheets.
There is a better way. Just make an unconditional offer of complete relief to the plaintiff. Even include a check. There is no need to invoke Rule 68. At least in some circuits, such an offer in a single-plaintiff, multi-plaintiff, or collective action context — whether accepted or unaccepted — can moot a case even when Rule 68 is not in the picture. The 7th Circuit, for example, has made this clear on multiple occasions. This provides two benefits. First, there’s no judgment against the employer. Rather, the case gets dismissed for lack of jurisdiction due to mootness. Second, there is no liability for fees. Under the FLSA, only prevailing plaintiffs are entitled to attorneys’ fees. But when a case is dismissed as moot and a plaintiff is not awarded a favorable judgment, the Supreme Court has held that there is no entitlement to fees.
At bottom, Rule 68 should have no role in attempting to moot a wage-hour case in most circuits. If the case includes class action allegations under state wage-hour law, a Rule 68 offer of complete relief doesn’t moot the putative class action. And if the case is a pure FLSA collective action claim, an offer of complete relief — without resort to Rule 68 — may moot a case without carrying the baggage that Rule 68 offer brings. And even then, an employer has to weigh whether it should try to moot a named plaintiff’s FLSA claim. Other potential plaintiffs may be waiting in the wings anyway, and an offer of full relief to the first current or former employee who files a claim risks putting “blood in the water” and also making an enemy of a plaintiff’s counsel. As with virtually any strategy decision, whether to try to moot a case must be decided on a case-by-case basis.