Thursday, January 21, 2016

SCOTUS makes "picking off the plaintiff" in FLSA collective actions a lot harder

Let's start with some recent history. Remember back in 2013, when the Supreme Court decided Genesis Healthcare Corp. v. Symczyk (Lawffice Space coverage here)? Let me give you a brief recap.

Justice Ginsburg authored the opinion
in Campbell-Ewald Co. v. Gomez
An employee initiated a FLSA wage and hour claim with the intention of making it a collective action. The employer made an offer of judgment (under Fed. R. Civ. P. 68), which would have given the plaintiff all of the damages to which he claims he was entitled. The employer then argued, welp, I guess the employee's case is moot because he can't possibly collect any additional damages through litigation; and, if his case is moot, then the whole lawsuit should be tossed because there are no other employees in the collective action yet.

The Supreme Court decided the case, but with a major assumption. The Court assumed - without actually deciding - that the Rule 68 offer of judgment mooted the lead employee's case. From there, the Court concluded that if the employee's claim was moot, then the whole case should be dismissed because no other employees had joined the collective action at that point in time.

The Court left the question of whether the offer of judgment actually mooted the case for another day. Yesterday was that day. The Court issued its opinion in Campbell-Ewald Co. v. Gomez.

The background facts of the case are very different. The case involves an offer of judgment in the context of the Telephone Consumer Protection Act (TCPA) and unwanted text messages. However, the holding is clear and it will obviously apply to federal litigation generally:
We hold today, in accord with Rule 68 of the Federal Rules of Civil Procedure, that an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists . . . . In sum, an unaccepted settlement offer or offer of judgment does not moot a plaintiff ’s case.
This will make it much harder for an employer to "pick off the plaintiff" (as the strategy was called) in class or collective actions. In other words, employers facing wage and hour collective actions can not just offer to pay the lead plaintiff's damages. However, the strategy still has some viability, if the employer offers the lead plaintiff damages and (s)he accepts it

Update: I should note that there is some discussion in the case of ways to circumvent the ruling. For example, the majority states "We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff ’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount." Justice Alito's dissent notes "The defendant might hand the plaintiff a certified check or deposit the requisite funds in a bank account in the plaintiff ’s name." It sounds like some questions remain . . . .

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