United States: Supreme Court Holds That Plaintiff Whose Individual Claims Were Mooted By An Offer Of Judgment Lacks Standing To Maintain FLSA Collective Action

Last Updated: April 17 2013
Article by Kevin S. Ranlett

Keywords: Deposit Guaranty Nat'l Bank v. Roper, Fair Labor Standards Act, Genesis Healthcare Corp. v. Symczyk, Greisz v. Household Bank (Ill.) N.A., McCauley v. Trans Union L.L.C., O'Brien v. Ed Donnelly Enters. Inc., offer of judgment, Second Circuit, Seventh Circuit, Weiss v. Regal Collections

The Fair Labor Standards Act of 1938 ("FLSA") permits an employee to file a "collective action" for damages against an employer individually and on behalf of other "similarly situated" employees who later choose to join the lawsuit. 29 U.S.C. § 216(b). In Genesis Healthcare Corp. v. Symczyk, before any other employee had opted to join the suit, the defendant made an offer of judgment to the named plaintiff for the full relief sought by her individual claims. Today, the Supreme Court held—by a 5-4 vote—that the district court had properly dismissed the FLSA collective action for lack of standing. Writing for the majority, Justice Thomas explained that once the offer of judgment had mooted the named plaintiff's individual claims: "A straightforward application of well-settled mootness principles compels" the conclusion that the entire action "became moot, because she lacked any personal stake in representing" other employees, and thus there no longer was any "case or controversy" for decision, as required by Article III of the U.S. Constitution.

The court of appeals had reversed the dismissal, reasoning that to allow the defendant to "pick off" the named plaintiff with an offer of judgment before the collective action could be certified would "frustrate" the goals of FLSA collective-action provisions. In the Supreme Court, the majority rejected this argument because it rested on distinguishable cases involving class actions. In those cases, the majority explained, either it would be impossible for any other class member to pursue claims for injunctive relief if the class action were dismissed (because of the claims' transitory nature) or the putative class already had acquired "independent legal status" before the offer of judgment was made. Neither is true of an FLSA collective action for damages that no other employee had yet joined.

The plaintiff also had relied on a statement in Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980), criticizing the use of offers of judgment to "pick off" the named plaintiff in a class action before class certification. But the majority explained that Roper's holding turned on the fact that the plaintiff in that case had a continuing interest in trying to reduce his share of attorneys' fees by splitting them among an entire certified class. By contrast, in this case, the offer of judgment included the named plaintiff's attorneys' fees and thus "provided complete relief on [the plaintiff's] individual claims." Moreover, the majority suggested that Roper may have been abrogated by a later decision holding that an interest in seeking attorneys' fees is insufficient to confer standing.

Justice Kagan, joined by Justices Ginsburg, Breyer and Sotomayor, dissented, taking issue with the majority's reliance on what they saw as the lower courts' "mistake" that the plaintiff's claim was mooted by the unaccepted offer of judgment. The dissenters noted that the Court had simply assumed that the named plaintiff's individual claims were moot because she had conceded that fact in the litigation. But because plaintiffs in future cases will not make the same concession, the dissenters contended that the Court's holding was a "one-off" result involving a situation "that should never arise again."

Symczyk is of substantial importance to any business that faces collective or class actions of any stripe. Despite the dissent's assertion that the Court's holding is limited to this case only, the logic of the Court's decision applies to all FLSA collective actions—and potentially to class actions in general. Symczyk thus promises to give businesses a powerful method of settling named plaintiffs' claims in the context of meritless collective and class actions. If a business is willing to pay the named plaintiff's demand in full at the very outset of the case, the Supreme Court's decision suggests that a plaintiff may be barred from pursuing a collective or class action and subjecting the business to the enormous costs of class-wide discovery in an effort to coerce a settlement.

Plaintiffs in future cases can be expected to argue, as did the dissent, that such an offer of judgment does not moot their individual claims.  Defendants may wish to point out that, in a footnote, the majority signaled that although it was not reaching the issue, if it did, it likely would agree with the unanimous conclusion of the courts of appeals that such an offer does have that effect.  See Szymczak, slip op. at 6 n.4 (citing O'Brien v. Ed Donnelly Enters., Inc., 575 F.3d 567, 575 (6th Cir. 2009); McCauley v. Trans Union, L.L.C., 402 F.3d 340, 342 (2d Cir. 2005); Weiss v. Regal Collections, 385 F.3d 337, 340 (3d Cir. 2004); Greisz v. Household Bank (Ill.), N.A., 176 F.3d 1012, 1015 (7th Cir. 1999)).  Defendants also can defend that conclusion by explaining that, as a matter of first principles, there is no Article III case or controversy for the court to resolve if the defendant is willing to agree to the relief the plaintiff seeks.

In any event, defendants should remain aware that making an offer of judgment to a named plaintiff to moot a collective or class action likely would not impede any government enforcement action based on the underlying allegations.

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Edited by Archis A. Parasharami and Kevin S. Ranlett

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2013. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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