Can "Mooting" a Class or Collective Action Be a Sound Defense Strategy?

03 June 2013 Labor & Employment Law Perspectives Blog

Procedural rules that govern lawsuits in federal court permit defendants to make an “offer of judgment,” which is a mechanism allowing a defendant to offer to settle a lawsuit. If a plaintiff is offered such a settlement and rejects it, and thereafter wins either the same or less than the amount contained in the offer of judgment, the plaintiff generally cannot recover for any costs incurred after rejection of the offer of judgment, such as attorneys’ fees. This mechanism can provide settlement leverage and, interestingly, it may now provide a helpful defense strategy for managing class and collective actions.

In Genesis Healthcare Corp. v. Symczyk, the United States Supreme Court recently dismissed a collective action suit brought under the FLSA seeking allegedly unpaid wages on a class basis. In the case, the employee had sued her employer on her own behalf and on behalf of those “similarly situated” under the FLSA for back pay for time she and other employees worked during lunch, but for which they were not compensated because meal time was automatically deducted. Early in the case, the employer made an offer of judgment. However, that employee failed to respond to the employer’s offer, a fact that ultimately caused the court first hearing the matter to dismiss the entire case based on the assertion that the offer of judgment fully satisfied the employee’s individual claim and no other individuals had yet joined the employee’s suit.

After an intermediate appellate court reversed that dismissal based on the argument that an employer’s ability to use an offer of judgment to moot a class or collective action, the Supreme Court reinstated the dismissal of the original court. Relying on the assumption that the employee’s individual claim was moot because she had not challenged the issue earlier on appeal, meaning it was admitted that the offer of judgment fully satisfied her individual claim, the Supreme Court concluded that both the individual and collective claims were properly dismissed. As to the collective claims, the Court stated that the “mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied.”

The Genesis decision suggests a potentially powerful strategy to consider at the outset of an FLSA collective action claim. However, an offer of judgment may not be an easy out — in Genesis, for example, the Supreme Court’s decision relied heavily on the fact that there was no dispute the offer of judgment fully satisfied the individual employee’s claim. In other words, simply making an offer of judgment and having it rejected will not provide an automatic basis for dismissal of collective actions. We expect further development of these issues, but for now, Genesis suggests a potential defense strategy worth consideration early on in FLSA collective action cases.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.