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Can an employer, faced with a purported class action under the Fair Labor Standards Act, avoid litigation by immediately offering a settlement to the sole plaintiff before a class is certified?

Can employers stop class actions before they start?

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Can an employer, faced with a purported class action under the Fair Labor Standards Act, avoid litigation by immediately offering a settlement to the sole plaintiff before a class is certified?

The justices of the U.S. Supreme Court tackled that question recently during oral arguments in the case of Genesis Healthcare Corp. v. Symczyk.

The matter involves Laura Symczyk, who filed a purported class action alleging that her employer, Genesis HealthCare Corp., violated the Fair Labor Standards Act by automatically deducting time for breaks from employees’ time sheets, regardless of whether the workers were performing job duties during that time.

Before other workers could join Symczyk’s suit, Genesis offered her a Rule 68 offer of judgment in the amount of $7,500 for lost wages and other fees, which she did not accept. But a District Court judge ruled that the settlement offer mooted any potential class action and dismissed the case for lack of subject matter jurisdiction.

The 3rd Circuit reversed, ruling that the case should not have been dismissed before other similarly situated employees were given the opportunity to opt in.

Allowing such actions would give defendants the ability to strategically “pick off” named plaintiffs to thwart class actions before they begin, the court ruled.

The Supreme Court granted Genesis’s petition for certiorari.

Can employer ‘free itself from litigation?’

Ronald J. Mann, a professor at Columbia Law School in New York, argued on behalf of Genesis that the 3rd Circuit’s ruling “deprives the defendant of the ability to free itself from litigation even when it is willing to pay complete relief to the sole plaintiff.”

Justice Ruth Bader Ginsburg noted that if the offer of judgment had been accepted by the plaintiff, others would have been precluded from bringing similar claims.

“The rules of issue and claim preclusion would apply,” Mann agreed, but “it’s common for there to be preclusive effect of a judgment in one case against people that are not parties.”

Justice Elena Kagan looked to the court’s ruling in Knox v. Service Employees International Union to help decipher whether the current case should have been deemed moot at all.

“Here is what the court said … in Knox last year … : ‘A case becomes moot when it’s impossible for a court to grant any effectual relief whatever to the prevailing party,’” Kagan said. “Now, here the judge says: ‘OK, is this case moot? Well, it’s not moot because at the very least I could give the plaintiff $7,500, but I didn’t, [so] she still has her claim for at least $7,500.’”

The difference in the current case, Mann argued, was that the adequacy of the $7,500 offer to satisfy the judgment was “conceded repeatedly over the course of several years” by the plaintiff.

Ginsburg asked whether it would have made a difference if the plaintiff had sought to certify other workers in the class at the time the suit was filed.

“Suppose the plaintiff had, simultaneously with the filing of the complaint, moved to have it preliminarily certified as on behalf of other employees similarly situated?” Ginsburg asked.

Mann said the result would be the same because “there’s just this one person” who is party to the claim, and she would still be the only person for whom the judgment could have been made.

“So it wouldn’t make any difference?” Ginsburg asked.

“It wouldn’t make any difference,” Mann said.

Waived argument?

When Neal K. Katyal, a partner in the Washington office of Hogan Lovells arguing on behalf of the plaintiff, said he wanted to begin his argument by saying that a mootness dismissal was improper under Rule 68, Chief Justice John G. Roberts Jr. had an immediate response.

“I’d like to begin with the question of whether or not you waived that argument,” Roberts retorted.

“We did not waive it,” Katyal said. “We do think that the brief in opposition should have pointed it out, absolutely. It was a mistake on our part not to.”

Roberts said that if the argument had been properly argued, “we might have thought differently about whether to grant [certiorari].”

Back to the merits, Kagan asked Katyal what should happen if “a defendant comes forward and says, ‘I’m willing to satisfy the entire claim’?”

Katyal said the plaintiff should not be put in the position to bind others’ rights.

“You can’t force an offer onto a plaintiff that doesn’t award complete relief, because if you do so it undermines the collective action aspect of the claim,” Katyal said.

“Well, it undermines the collective aspect if she never brings the suit in the first place,” Justice Antonin G. Scalia said. “I don’t know that the law demands that there be a collective suit.”

Katyal said the availability of class actions in the statute shows that the plaintiffs have that right.

“I think that, as Justice Ginsburg said, if you adopt their rule, essentially you truncate that process and eliminate the ability of people to opt in” to the suit, Katyal said.

The government argued in support of Symczyk’s position, asserting that the plaintiff’s claim should still be deemed live.

The employee “has never been compensated for her individual damage claim, nor has she received a court judgment favorably adjudicating that claim,” said Anthony A. Yang, assistant to the U.S. solicitor general.

Justice Stephen G. Breyer asked if the result would be different in a case in which an employee claimed the employer did not pay him on time, and when the “employer gave [a worker] the paycheck, he just didn’t cash it.”

“That doesn’t eliminate the past injury,” Yang said.

Roberts seemed unconvinced. “So if you’re due $100 from your employer, it’s a day late, he gives you $100 [plus] another dollar for interest, that doesn’t eliminate the past injury?”

“It doesn’t eliminate the injury,” Yang said. “It might be compensation for the injury.”

A ruling is expected later this term.

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