United States: Pick-Off Strategy Via A Rule 68 Offer Of Judgment Suffers Stinging Defeat In The Supreme Court; But Can An Actual Payment To The Plaintiff Do The Trick?

Last Updated: January 25 2016
Article by Michael S. Arnold and Gauri P. Punjabi

An unaccepted Rule 68 Offer of Judgment for complete relief does not moot a plaintiff's individual and class action claims said the Supreme Court on Wednesday.  The decision in Campbell-Ewald Co. v. Gomez is welcome news for employees and the class action bar, but it does not necessarily foreclose a "pick off" strategy often used by employers to head off class actions before they materialize.  Like it did in Genesis Healthcare nearly three years ago, the Supreme Court only went so far with its analysis, and this time in Gomez, while effectively ending the Rule 68 method, it left open the possibility that employers could pick off named plaintiffs by actually paying them the amounts allegedly owed.

Quick Background on The Pick-Off Strategy

The pick-off strategy aims to quickly end potential class action cases through the use of a Rule 68 offer of judgment, which offers the named plaintiff all of the relief that he or she sought.  Even if the plaintiff rejects or refuses to respond to the Rule 68 offer, the employer seeks the dismissal of the case on the basis that the offer provides the plaintiff with everything asked for in the complaint and therefore there is no controversy remaining to litigate.  Because the plaintiff's claim is thereby mooted before a class certification motion is filed, so the argument goes, it also means that the case cannot proceed on a class basis.

In 2013, in Genesis Healthcare v. Symczyk, a Fair Labor Standards Act (FLSA) case, many thought the Supreme Court was finally going to bless or reject the Rule 68 pick-off strategy, but it punted.  The majority "assumed, without deciding" that a Rule 68 offer of judgment for complete relief, even if unaccepted, moots a plaintiff's claim.  The dissent disagreed, questioning why the court even took up the case in the first place if it wasn't going to decide the issue, and said that a Rule 68 offer should not moot the case.  After Genesis Healthcare, employers continued to make Rule 68 offers with success in some jurisdictions.  As a judicial split over this issue continued to persist, the issue quickly made its way back to the Supreme Court.

The Supreme Court Ends the Rule 68 Offer of Judgment Debate

In Gomez, the Court specifically addressed – and discounted – the majority opinion in Genesis Healthcare.  Looking to contract law, which holds that a rejection of an offer leaves the parties in the same position in which they were prior to the offer being made, the Gomez majority said that is exactly what happens with the rejection of a Rule 68 offer of judgment.  Specifically, the Supreme Court held that because the employer had only offered to satisfy Gomez's claims, Gomez's rejection of that offer resulted in his claims remaining as an active controversy.  Gomez's claims – and therefore his ability to seek certification of a class action – survived.  Game over right?  Not so fast.  The Gomez ruling may not mean that employers can no longer "pick off" plaintiffs in order to avoid a class action.

The Supreme Court Dangles the "Actual Payment" Option In Front of Employers

While effectively eliminating the Rule 68 Offer of Judgment option, the majority still pondered whether an actual payment to Gomez of the full amount on his individual claim would have the intended effect.  In other words, while the mere offer of judgment is insufficient to render a named plaintiff's individual and class claims moot, would a full payment do just that?  But the majority did not answer the question; nor did Justice Thomas in his concurring opinion.  The dissenting Justices however, signaled that the actual payment method may be effective in picking off the named plaintiff.  The employer could pay the plaintiff directly or it could deposit the money with the court to be released to the plaintiff upon dismissal of the action.

While the Court's decision in Gomez certainly advanced the ball, it is at most an incremental expansion on Genesis Healthcare, leaving employers and employees guessing whether the pick-off strategy remains viable.  We don't know where the Supreme Court will ultimately come out on this issue.  A first read of the Gomez opinion leads one to believe that the Court may endorse the "actual payment" method, but a closer read leaves us wondering whether even that will fall short.  The question the justices will likely have to answer is whether an actual payment even without an "admission of liability" still amounts to "complete relief" such that there is no longer an active controversy.  If they answer that question in the affirmative, employers may still be in the game.  Stay tuned.

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Michael S. Arnold
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