Will Genesis Prompt Supreme Court Evolution in Distinguishing Collective and Class Actions?

Co-authored by Richard Alfred and Loren Gesinsky

On June 25, 2012, the U.S. Supreme Court agreed to review whether an entire lawsuit is mooted when the employer in a Fair Labor Standards Act (FLSA) collective action makes an offer of judgment that would fully satisfy the sole plaintiff’s claims before any certification effort. (Genesis Healthcare Corp. v. Symczyk). Employers should benefit from clarity about offers of judgment in this context. More significantly, however, this case provides the Court with the first clear opportunity since 1989 to revisit the very nature of FLSA collective actions and give employers needed defenses to the process and standards applied almost routinely by district courts regarding facilitating notice and the status of opt-in plaintiffs.

In the case now heading for Supreme Court review, a registered nurse claimed that her healthcare employers automatically deducted a daily 30-minute meal break even for such periods in which she and colleagues had actually worked. She filed her lawsuit both individually and on behalf of a group of “similarly situated” individuals. Her employers filed a $7,500 offer of judgment as part of its initial response, which she rejected but admitted would have fully satisfied her individual claim.

An offer of judgment under Federal Rule of Civil Procedure 68, despite many inherent limitations, forces a plaintiff either to accept the offer or be responsible for the defendant’s post-offer costs if the ultimate judgment does not exceed the offer. Where the judgment offered is clearly equal to or in excess of the full relief sought by the plaintiff(s), some courts have also determined that the offer, even if rejected, moots the controversy.

While an offer of judgment is clearly an available option for an employer defending against an individual claim, it cannot be used to, in the words of a 32-year-old Supreme Court decision, “pick off” the designated representatives in a class action brought under Federal Rule of Civil Procedure 23. The murkier issue is the applicability of offers of judgment in the context of a collective action brought under Section 216(b) of the FLSA.

The Third Circuit reversed the district court’s determination that the Rule 68 offer mooted the case, relying on decisions prohibiting the “picking off” of designated class representatives in Rule 23 class actions before courts have a chance to consider whether class certification is appropriate. The Supreme Court granted the employers’ petition for review, which was supported in amicus briefs filed by, among others, the U.S. Chamber of Commerce and DRI – The Voice of the Defense Bar. A central focus of these briefs was the fundamental difference between a FLSA named plaintiff not being the “representative” of similarly situated employees who opt into a collective action under Section 216(b), while all individuals within a defined Rule 23 class, including the named representative(s), are legally bound unless they opt out of the action.

Thus, the Supreme Court seems poised to closely analyze the distinctions between collective and class actions for the first time since its 1989 decision in Hoffman-LaRoche Inc. v. Sperling. In Hoffman, the Supreme Court ruled that “in appropriate cases” a district court could oversee a collective action by authorizing, or facilitating, notice to potential opt-ins. Since Hoffman, many lower courts have lost sight of the fundamental nature of collective actions, blurring the lines between a representative class action and the joinder of individual claims in a collective action. This has resulted in confusion about the way in which collective actions should be treated, from courts’ overly “modest” standard for conditional certification, to the unfair and unreasonable discovery limitations of opt-in plaintiffs, to the “heightened” class-like standard commonly applied for decertification, and ending with the class treatment of a collective-action trial.

If the Court applies its 1980’s class-action precedents to FLSA collective actions in determining the mootness issue, the line between those two types of lawsuits will be further blurred. On the other hand, if the Court distinguishes its prior cases and applies a different rule in the context of settlements and offers of judgment, the decision could have sweeping implications for the way in which FLSA collective actions are litigated.

A decision is not expected until early next year, depending on the briefing and argument schedule to be set by the Court. We will report on the Supreme Court’s decision and any other developments of note in this case.