Three Circuits, In Addition to the Fourth Circuit, Reject Defense Efforts to Decapitate FLSA Collective Actions and/or Class Actions

Yesterday, we discussed the 4th Circuit’s recent rejection of a defense effort to decapitate an FLSA collective action in Simmons v. United Mrtg. & Loan Inv., LLC, 634 F.3d 754 (4th Cir. 2011).  The 4th Circuit is not alone by any means in rejecting defense efforts to “pick off” the plaintiff(s) in FLSA collective actions, either by tendering full relief or by conveying a Rule 68 offer of judgment that provides for full relief.  

In Symczyk v. Genesis HealthCare Corp., No. 10-3178, 2011 U.S. App. LEXIS 18114 (3d Cir. Aug. 31, 2011), the 3rd Circuit, with Judge Scirica writing for the panel, reversed the District Court’s holding that the plaintiff’s FLSA action was mooted by the defendants’ Rule 68 offer of judgment.  Defendants’ offer of judgment provided for all of plaintiff’s alleged damages, “plus attorneys’ fees, costs, and expenses as determined by the court,” was made prior to plaintiff’s motion for preliminary certification, and was rejected by plaintiff.  Id. at *2 (quotations omitted); Symczyk v. Genesis HealthCare Corp., No. 09-5782, 2010 U.S. Dist. LEXIS (E.D. Pa. May 19, 2010).  In finding that the Rule 68 offer did not moot the case, Judge Scirica was plain-spoken in his disdain for the defense tactic of “picking off” the plaintiff(s) in order to prevent  a collective action from proceeding.  Judge Scirica noted that Rule 68 was designed to “encourage settlement and avoid litigation” but that, in the case of representative actions, it could be “manipulated to frustrate rather than to serve these salutary ends.”  Symczyk, 2011 U.S. App. LEXIS 18114 at *17-*18.  Later, Judge Scirica dismissed defendants’ argument that plaintiff’s case could be mooted by a Rule 68 offer before other plaintiffs “opted-in” to the suit, stating that “[a]lthough defendants’ logic has some surface appeal, reliance on the watershed event of an opt-in to trigger application of the special mootness rules that prevail in the representative action context incentivizes the undesirable strategic use of Rule 68 that prompted our holding in [Weiss v. Regal Collections, 385 F.3d 337 (3d Cir. 2004)].”  Id. at *28.  In Weiss v. Regal Collections, then-Chief Judge Scirica held that a Rule 68 offer of judgment does not moot the claims of a class representative under Civil Rule 23.  Weiss, 385 F.3d at 339.

About three weeks prior to the 3rd Circuit’s ruling in Symczyk, the 9th Circuit addressed these issues in Pitts v. Terrible Herbst, Inc., No. 10-15965, 2011 U.S. App. LEXIS 16368 (9th Cir. Aug. 9, 2011).  In Pitts, plaintiff brought a state-law class action alongside a collective action under the FLSA.  Before plaintiff moved for certification of the class and collective actions, defendant presented plaintiff with an offer of judgment pursuant to Rule 68 for $900 (plaintiff claimed only $88.00 in damages for himself) “plus costs and a reasonable attorney’s fee.”  Id. at *3.   Plaintiff refused defendant’s offer and defendant moved to dismiss plaintiff’s claims as moot.  Id.  The District Court held that defendant’s offer of judgment mooted the action because plaintiff had failed to timely seek class certification, and entered judgment in favor of plaintiff for $900, with $3,500 for plaintiff’s attorney.  Id. at *4; Pitts v. Terrible Herbst, Inc., No. 09-00940 (D. Nev. April 1, 2010).  On appeal to the 9th Circuit, Judge Bybee, writing for the panel, held that defendant’s unaccepted offer of judgment did not moot plaintiff’s case because plaintiff’s claim was “transitory in nature and may otherwise evade review.”  Pitts, 2011 U.S. App. LEXIS 16368 at *20.  The 9th Circuit explained that subsequent certification of the class by the District Court would relate back to the filing of the complaint, seeing no reason to restrict the relation-back doctrine to cases involving inherently transitory claims.  Id. at *20.  Judge Bybee elaborated that “[w]here, as here, a defendant seeks to ‘buy off’ the small individual claims of the named plaintiffs, the analogous claims of the class – though not inherently transitory – become no less transitory than inherently transitory claims.”  Id. at *20-*21 (emphasis in original).

On March 31, 2011, the 10th Circuit also addressed these issues in Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239 (10th Cir. 2011).  In Lucero, the plaintiff had filed a Rule 23 class action complaint alleging violations of the Fair Debt Collection Practices Act and certain state laws.  At the same time defendant served its answer, it also served plaintiff with a Rule 68 offer of judgment, offering damages plus “reasonable attorneys’ fees and costs incurred to that date.”  Id. at 1241.  Prior to the close of discovery on the issue of class certification, defendant moved to dismiss for lack of subject matter jurisdiction.  Id.  After defendant’s motion to dismiss, but prior to the District Court’s ruling, plaintiff filed his motion for class certification.  Id.; Lucero v. Bureau of Collection Recovery, Inc., 716 F. Supp. 2d 1085 (D.N.M. 2010).  The District Court granted defendant’s motion to dismiss, concluding that “jurisdiction is not present over a case where no class has been certified but the defendant has satisfied the plaintiff’s demand for relief.”  Lucero, 639 F.3d at 1241 (internal quotations omitted); Lucero, 716 F. Supp. 2d 1085.  On appeal, the 10th Circuit reversed, holding that “a named plaintiff in a proposed class action for monetary relief may proceed to seek timely class certification where an unaccepted offer of judgment is tendered in satisfaction of the plaintiff’s individual claim before the court can reasonably be expected to rule on the class certification motion.”   Lucero, 639 F.3d at 1250.  Judge Kelly, writing for the unanimous panel, relies, in part, on Justice Rehnquist’s concurrence in Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326, 341 (1980), in which Justice Rehnquist stated as follows:

The distinguishing feature here is that the defendant has made an unaccepted offer of tender in settlement of the individual putative representative's claim. The action is moot in the Art. III sense only if this Court adopts a rule that an individual seeking to proceed as a class representative is required to accept a tender of only his individual claims. So long as the court does not require such acceptance, the individual is required to prove his case and the requisite Art. III adversity continues. Acceptance need not be mandated under our precedents since the defendant has not offered all that has been requested in the complaint (i.e., relief for the class) and any other rule would give the defendant the practical power to make the denial of class certification questions unreviewable. Roper, 445 U.S. at 341 (Rehnquist, J. concurring) (emphasis in original).

Judge Kelly’s opinion in Lucero also provides a good discussion of the applicable Supreme Court jurisprudence bearing on these issues, i.e., Sosna v. Iowa, 419 U.S. 393 (1975) (once a class has been certified, the expiration of a named plaintiff’s claim will not moot the action on appeal); Gerstein v. Pugh, 420 U.S. 103 (1975) (Court extends its rationale to the pre-certification context); Roper, 445 U.S. 326 (Court holds that an offer of judgment to a named plaintiff made while a certification motion is pending will not moot the action); and U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980) (Court holds that a named plaintiff, released from prison while a certification motion is pending, may appeal a denial of class certification despite the mootness of his individual claim).

We will continue our discussion on the decapitation tactic in tomorrow’s blog.