In a ruling that leaves open more questions than it answers, the Supreme Court last month decided Genesis Healthcare Corporation v. Symczyk.
The case involves a tactic corporate defense attorneys sometimes use to attempt to nip class action lawsuits in the bud. After a putative class action lawsuit is filed, the defendant makes an offer of judgment under Rule 68 of the Federal Rules of Civil Procedure for the entire amount of damages that the individual plaintiff is seeking.
"We note that Courts of Appeals on both sides of that issue have recognized that a plaintiff’s claim may be satisfied even without the plaintiff’s consent."
If the plaintiff does not accept the offer, the defendant then moves to dismiss the lawsuit on the grounds that it is moot because the defendant offered the plaintiff complete satisfaction of the claim. If the plaintiff was seeking to represent a class of many plaintiffs, the corporate defendant has escaped liability merely by settling with a single individual, rather than the entire class.
As provided by the Federal Rules of Civil Procedure, an offer of judgment is an offer to settle a lawsuit that, if unaccepted, could result in the plaintiff paying the defendant’s legal fees if the ultimate recovery from the lawsuit is less than the settlement amount that was contained in the offer.
In Genesis Healthcare, Laura Symczyk, a registered nurse formerly employed by a hospital owned by Genesis Healthcare Corporation, alleged that the hospital violated the Fair Labor Standards Act (“FLSA”) by automatically deducting thirty minutes of time worked per shift for meal breaks for employees, even when the employees continued to work during these scheduled breaks.
When the hospital filed an answer to the complaint, it simultaneously served upon Ms. Symczyk an offer of judgment. The offer included $7,500 for alleged unpaid wages and reasonable attorneys’ fees and costs. The hospital stipulated that if the plaintiff did not accept the offer within 10 days, the offer would be deemed withdrawn.
Ms. Symczyk and her attorneys did not respond to the offer of judgment. The hospital then filed a motion to dismiss, claiming that because they offered her complete relief on her individual claim, she no longer possessed a personal stake in the outcome of the suit, rendering her action moot. Ms. Symczyk’s lawyers objected, arguing that the hospital was improperly attempting to “pick-off” the named plaintiff before the class action process could begin.
Relying on Third Circuit precedent, the federal district court concluded that the defendant’s Rule 68 offer of judgment mooted the plaintiff’s lawsuit, which the court then dismissed for lack of subject-matter jurisdiction.
On appeal, the Third Circuit reversed the decision. The appellate court agreed that an offer a judgment that provides full satisfaction of a plaintiff’s claim generally moots a plaintiff’s lawsuit. Nevertheless, the appellate court ruled that the lower court should have allowed the lawsuit to proceed through the class action process. The Third Circuit held that calculated attempts by defendants to pick-off named plaintiffs with strategic Rule 68 offers of judgment before certification could “short circuit” the class action process, and thereby frustrate the goals of class action litigation.
Genesis Healthcare appealed the Third Circuit’s decision and the Supreme Court agreed to hear the case. In a 5-4 opinion, a fiercely divided court reversed the Third Circuit’s decision and held that because the plaintiff had conceded the issue in the lower court that the unaccepted offer of judgment mooted her lawsuit, the Supreme Court could not rule on this issue since it was not properly presented and briefed to the Court.
Curiously, Justice Thomas addresses, or rather fails to address, the main issue of the case in a footnote to his opinion. In the footnote, Justice Thomas states that “while we do not resolve the question whether a Rule 68 offer [of judgment] that fully satisfies the plaintiff’s claims is sufficient by itself to moot the action, we note that Courts of Appeals on both sides of that issue have recognized that a plaintiff’s claim may be satisfied even without the plaintiff’s consent.”
Justice Thomas goes on to state in the footnote that “nothing in the nature of FLSA actions precludes satisfaction – and thus the mooting – of the individual’s claim before the collective-action component of the suit has run its course.”
In a strongly-worded dissent, Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor, warns lower courts that putative class and collective action lawsuits should not be dismissed because of unaccepted offers of judgment to the lead plaintiffs.
The dissent begins by observing that “the Court today resolves an imaginary question, based on a mistake the courts below made about this case and other like it.” Justice Kagan further offers “a friendly suggestion to the Third Circuit: rethink your mootness-by-unaccepted-offer theory and a note to all other courts of appeals: don't try this at home.“
Justice Kagan advises lower courts to “feel free to relegate the majority's decision to the furthest reaches of your mind: the situation it addresses should never again arise.”
Despite Justice Kagan’s admonishments, courts will most likely continue to face the issue of whether an unaccepted offer of judgment moots a class action. Corporate defendants will undoubtedly rely on the Genesis majority opinion in trying to pick-off plaintiffs. Perhaps the issue will eventually be properly presented to the Supreme Court and it will be settled once and for all.
About the Author
Austin Tighe is a founding partner of Feazell & Tighe LLP
. Mr. Tighe's practice focuses on class actions, business litigation, labor law, and a variety of personal injury matters. A seasoned litigator, Mr. Tighe is ranked as one of the Top 100 Trial Lawyers in Texas by the National Trial Lawyers Association. Mr. Tighe is currently co-lead counsel in over a dozen putative consumer class action cases, a number of which are nationwide claims filed on behalf of tens of thousands of potential class members.