Fourth Circuit Rejects Defense Attempt to Decapitate FLSA Collective Action

In Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754 (4th Cir. 2011), the Fourth Circuit faced the question of whether the contents of a letter from defense counsel to plaintiffs’ counsel, clarified by a follow-up letter, rendered moot plaintiffs’ claims for unpaid overtime wages in an FLSA collective action.  The District Court found the case to be moot, and the Court of Appeals vacated and remanded that decision.  Here, defense counsel sent a letter to plaintiffs’ counsel in which he stated that he was authorized “without admitting legal liability or fault, to offer each opt-in plaintiff full relief in this case.”  The letter went on to state:

Each opt-in plaintiff will be compensated fully upon receipt of an affidavit stating the dates on which overtime was worked, the total hours they worked each week of their employment up to the date of their termination, the total amount of back pay they claim is owed to them, and a statement explaining how the calculation of overtime amounts claimed was done. My clients will also pay taxable costs and reasonable attorney's fees supported by time records properly describing the work done and the hours reasonably worked which can be either agreed upon by the parties or submitted to the Court for resolution.

This offer requires that the parties enter a settlement agreement specifying that all claims will be waived and released, this action will be dismissed with prejudice, the settlement will be kept confidential and there will be no admission of liability or disclosure of the settlement terms. I will provide you with the information my client has that is necessary to prepare the affidavits.

This offer of full relief moots this case since there no longer remains any active case or controversy between the parties. This offer remains open for five days after receipt on May 23, 2008. Thereafter, if this offer is not accepted, I will file a motion to dismiss the case as moot.  Simmons, 634 F.3d at 760-61.

            Based upon the blanket nature of the defendants’ offer, the District Court held that the action was moot.  On appeal, plaintiffs argued that the defense letter did not comply with Civil Rule 68 regarding offers of judgment.  The Court of Appeals agreed with plaintiffs that the letter did not constitute a Rule 68 offer of judgment because an offer of judgment, if accepted, is to be public and not sealed; whereas the letter required the plaintiffs to keep the fact of settlement and the terms of settlement confidential. 

            Having found that the correspondence did not constitute a Rule 68 offer of judgment, the Court of Appeals went on to state that the doctrine of mootness is constitutional in nature and, therefore, not constrained by the formalities of Rule 68.  Nonetheless, the Court held that the defendants’ settlement offer did not render the plaintiffs’ FLSA claims moot. 

            The first basis for the court’s holding was that the offer of “full relief in this case” did not offer that judgment be entered against the defendants, but rather only offered for the parties to enter into a settlement agreement.  The Court recognized that a judgment is preferable to a contractual promise, such as a settlement agreement, as the District Courts have inherent power to compel defendants to satisfy judgments, but lack the power to enforce the terms of a settlement agreement absent jurisdiction over a breach of contract action for failure to comply with the agreement.   

            The second basis for the Appellate Court’s reversal was the conditional nature of the offer.  The correspondence conditioned the offer upon the plaintiffs submitting affidavits stating “the dates on which overtime was worked, the total hours they worked each week of their employment up to the date of termination, the total amount of back pay they claim is owed to them, and a statement explaining how the calculation of overtime amounts claimed was done.”  In addition, the offer stated that the defendants would provide the plaintiffs the information the defendants possessed “that is necessary to prepare the affidavits.”  The Court found that the unspecified information raised many unanswered questions, which made the offer ambiguous, and thus ineffective at mooting the plaintiffs’ FLSA claims. 

            Finally, the Court based its decision upon the defendants’ offer being predicated on a requirement of confidentiality, noting that if the plaintiffs litigated the case to judgment, they would be entitled to an unsealed judgment in their favor, without obligation on their part to keep the facts of such judgment confidential.

            Later this week, we will discuss the response of other courts to defense attempts to decapitate FLSA collective actions.