A Rule 68 offer of judgment affording complete relief to two named plaintiffs and one opt-in plaintiff does not moot the plaintiffs’ individual claims in an action for overtime compensation pursuant to the Fair Labor Standards Act (“FLSA”) and parallel provisions of the N.Y. Labor Law (“NYLL”) , a federal court ruled on Monday.  Velasquez v. Digital Page, Inc., 2013 U.S. Dist. LEXIS 95371 (E.D.N.Y. July 8, 2013).   The U.S. District Court for the Eastern District of New York (Judge Leonard D. Wexler) denied defendants’ request for reconsideration of a denial of a motion to dismiss for lack of standing in light of the Supreme Court’s recent ruling in Genesis Healthcare Corp. v. Symczyk, 131 S. Ct. 1523 (2013).

Background

Two-named plaintiffs commenced the action in August 2011 pursuant to the relevant provisions of the FLSA and NYLL seeking overtime compensation on behalf of themselves and those similarly situated.  Defendants extended a settlement offer to the named plaintiffs on October 5, 2011, which was promptly rejected.  Plaintiffs responded that same day by filing notice that an individual wished to opt-in as a member of the proposed collective action.  Five days later, defendants sought settlement of the opt-in plaintiff’s claim by making a Rule 68 offer of judgment, which also was rejected.  On December 22, 2011, plaintiffs moved to certify the matter as a collective action pursuant to FLSA 216(b).  Defendants responded by moving to dismiss the action on the ground that a Rule 68 offer of judgment of complete relief mooted the plaintiffs’ claim.  Defendants argued that the loss of the plaintiffs’ personal stake in the litigation deprived them of standing.  The district court denied the defendants’ motion to dismiss, holding that the plaintiffs’ rejection of a Rule 68 offer of judgment did not render the action moot.

On April 16, 2013, the U.S. Supreme Court decided Genesis Healthcare Corp. v. Symczyk in which the Court held that when a plaintiff concedes mootness of his individual FLSA claim and this concession precedes collective certification of the action, the plaintiff no longer has a personal interest in the outcome of the action and the case is no longer justiciable, notwithstanding the mere presence of collective-action allegations.  In light of this decision, the defendants asked the district court to reconsider its motion to dismiss the plaintiffs’ suit arguing that Genesis required dismissal on the ground that the unaccepted Rule 68 offers of judgment providing complete relief mooted the plaintiffs’ claims.  Plaintiffs argued that the case was distinguishable from Genesis.  The district court agreed with the plaintiffs and denied the defendants’ request for reconsideration.

District Court’s Analysis

Genesis was non-dispositive and was distinguishable, the district court explained.  The district court noted that the Supreme Court had explicitly stated in its opinion that the issue as to whether an unaccepted Rule 68 (full relief) offer of judgment renders the claim moot was not properly before the Court.  Because the plaintiff neither challenged nor appealed the mootness of her claims, the Supreme Court accepted, as a matter of fact, that the plaintiff’s claims were moot.  “[A]ssum[ing] without deciding” that the plaintiff’s claim was moot, the Supreme Court held that the mere presence of collective action allegations would not render an otherwise moot claim viable.  Based on its reading of Genesis, the district court concluded that “[b]ecause Genesis made no broad ruling regarding Rule 68 offers in general, it cannot be relied upon to change the decision previously reached here.”

The district court nevertheless acknowledged that “the ruling in [Genesis] may ultimately prove important in the disposition of this, and other FLSA actions” highlighting the fact that the Supreme Court drew a critical distinction between FLSA opt-in collective actions and Rule 23 opt-out class actions and its pronouncement that conditional certification under the FLSA does not produce a class of litigants with independent legal status, as is the case with a certified class of litigants under Rule 23.  Most importantly, the district court acknowledged that the Supreme Court found no support in its precedent that prohibited Rule 68 offers of judgment in an attempt to “pick off” plaintiffs to avoid FLSA collective actions.

Takeaway

After Genesis was decided in April, many legal commentators argued that the decision would have little precedential value going forward because plaintiffs would never again concede the issue as to whether an unaccepted Rule 68 offer of judgment moots the plaintiff’s individual claim in a collective action.  Here, unlike in Genesis, the plaintiffs expressly rejected the settlement offers, challenged their sufficiency, and preserved their argument against mootness.  Employers should expect plaintiffs, if they weren’t doing it before Genesis, to preserve these issues now.  Notwithstanding the decision reached in this case, employers should consult with counsel and consider whether a Rule 68 offer of judgment is an appropriate litigation strategy in FLSA collective actions, especially in those jurisdictions that recognize mootness of claims resulting from unaccepted offers of complete relief.