Q:        What is easiest way to get rid of a wage and hour class action?  

A:        Making an offer of judgment to moot the named plaintiff’s claim by proposing to pay him or her an amount that will fully satisfy his or her entire individual claim.

This is exactly the strategy that the employer utilized and which, at first blush, the U.S. Supreme Court approved in Genesis Healthcare Corp v. Symczyk. But don’t get too excited, a quick review of Genesis establishes that its utility will likely be limited. 

In Genesis, the plaintiff, a registered nurse, brought a class action lawsuit against Genesis claiming that it had improperly deducted a thirty (30) minute lunch break from each shift that its employees worked even though employees routinely performed compensable work during their lunch breaks. Genesis made an offer of judgment under Rule 68 at the same time as it filed its answer. Genesis’s offer exceeded any amount that Symczyk could have recovered on her individual claim and included reasonable attorneys’ fees and costs. Symczyk refused to accept the offer of judgment.  The district court dismissed the lawsuit because, under the controlling Third Circuit precedent, the case no longer presented a live controversy which is required for an action to remain in federal court under the provisions of Article III of the United States Constitution.  As there was no longer a live case or controversy, the case was “moot” and, therefore, the district court dismissed the case. The Third Circuit reversed on appeal.

In a 5-4 decision, the Supreme Court sided with the district court, and held that Symczyk could not continue to prosecute her class claims after she had been presented with an offer of judgment which fully satisfied and, therefore, mooted her individual claims. Importantly, in reaching this conclusion, the Supreme Court rejected Symczyk’s policy argument that defendants should not be permitted to avoid class actions by systematically “picking-off” the named plaintiff(s). The good news, however, ends there. Use of this case will likely be curtailed by the important questions that were not answered, including:

1.  Does an unaccepted offer of judgment under Rule 68 moot a plaintiff’s individual claims?

In reaching its decision on Genesis, the Supreme Court assumed, without deciding, that the unaccepted Rule 68 offer mooted Symczyk’s claims. The Supreme Court acknowledged that there is a circuit split on this issue, but declined to address the split because the issue had not been properly preserved on appeal. Because the Supreme Court did not address this issue, defendants seeking to employ Rule 68 offers to “pick-off” named plaintiffs in class actions are likely to continue to face a tough battle. This is especially true in the Fifth, Ninth and Tenth Circuits which have previously held that an unaccepted Rule 68 offer does not moot a plaintiff’s claims. 

2.  Does the Genesis ruling apply to class actions which are brought under Rule 23?

Symczyk argued that her interest in representing other employees in a collective action was sufficient to preserve her stake in the action. She based this argument on two cases decided under Rule 23, both of which dealt with Rule 68 offers that were made after a class was certified. The Supreme Court recognized the inherent differences between class actions under the Fair Labor Standards Act (“FLSA”), which require that class members affirmatively “opt-in” to the class, and class actions under Rule 23, which do not require any affirmative action by class members. It explained that even after the certification of a class under the FLSA, employees still must opt-in and, therefore, there is not a “class” until employees opt-in. The Court’s reasoning would appear to apply equally to a class action under Rule 23 before there is any decision regarding class certification because at that juncture there is, similarly, no “class.” However, due to the fact that the Court did not directly address this issue, and highlighted the differences between opt-in and opt-out classes, defendants seeking to employ this tactic in cases involving an opt-out class will likely continue to face staunch opposition.

3.  Can a plaintiff retain an economic interest in the litigation by simply claiming that they would like to shift a portion of their attorney’s fees and expenses to the class?

In ruling on Genesis, the Supreme Court referenced its prior decision in Deposit Guaranty Nat. Bank v. Roper explaining that in Roper it held that the plaintiff retained a continuing economic interest in a pre-certification class action following a Rule 68 offer because they sought to shift a portion of their attorney’s fees to the potential class. The Court noted that it held in the subsequent decision in Lewis v. Continental Bank Corp. that an interest in attorneys’ fees was not sufficient to create a viable case or controversy. However, because Symczyk had admitted that the Rule 68 offer completely satisfied her individual claims, the Court declined to address the continuing validity of Roper in light of the decision in Lewis. Thus, defendants can expect that, following the Genesis decision, plaintiffs who are faced with a Rule 68 offer will argue that they have a continuing economic interest in spreading attorneys’ fees to other potential class members. Unfortunately, Genesis does not provide much in the way of guidance to lower courts faced with this question.

Thus, while Genesis provides useful tools to defendants seeking to quash class actions in their preliminary stages, the fight regarding whether “picking off” a named plaintiff is a viable litigation strategy is far from over.