The Supreme Court's recent ruling in Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523 (2013) (click here), has sparked a debate among legal commentators regarding the effect an offer of judgment under Rule 68 of the Federal Rules of Civil Procedure has on a pending, putative class action - and whether the case can be extended to actions beyond the Fair Labor Standards Act ("FLSA") context. As one commentator in a recent Corporate Counsel explained (click here): "Some courts have held that an offer of judgment moots a class representative’s claims, requiring dismissal of the class action, while others have held an offer of judgment alone insufficient to dismiss a case."
Genesis: Relevant Facts and Procedural History
In Genesis, a plaintiff brought a class action under the Fair Labor Standards Act ("FLSA") on behalf of herself and "other employees similarly situated." After the plaintiff ignored the company's offer of judgment under Rule 68 of the Federal Rules of Civil Procedure (an offer of judgment which included $7,500 for plaintiff's unpaid wages, in addition to reasonable attorneys' fees), defendants filed a motion to dismiss for lack of subject-matter jurisdiction, arguing that because they offered the plaintiff complete relief on her individual damages claim, she no longer possessed a personal stake in the outcome of the suit, rendering the action moot. The district court agreed, finding that no other individuals had joined her suit, that the Rule 68 offer fully satisfied her claim, and that the plaintiff's suit was moot, thereby dismissing it for lack of subject-matter jurisdiction. The Third Circuit reversed. It held that respondent’s individual claim was moot but that her collective action was not, explaining that allowing defendants to "pick off" named plaintiffs before certification with calculated Rule 68 offers would frustrate the goals of collective actions. The case was remanded to the district court to allow respondent to seek "conditional certification," which, if successful, would relate back to the date of her complaint.
The Supreme Court's Majority Opinion in Genesis
The Supreme Court, in a 5-4 ruling authored by Justice Thomas, held that because the plaintiff had no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness, her suit was appropriately dismissed for lack of subject-matter jurisdiction.
As a threshold issue, Justice Thomas observed that, while the Courts of Appeals disagree whether an unaccepted Rule 68 offer that fully satisfies a plaintiff’s individual claim is sufficient to render that claim moot, respondent conceded the issue below and did not properly raise it here. Thus, Justice Thomas' opinion stated that the Court "assumes, without deciding," that petitioners’ offer mooted her individual claim. Therefore, well-settled mootness principles control the outcome of this case. After plaintiff's individual claim became moot, the suit became moot because she had no personal interest in representing others in the action.
To avoid that outcome, Justice Thomas noted that the plaintiff relied on cases that arose in the context of Rule 23 class actions, but they are inapposite here, both because Rule 23 actions are fundamentally different from FLSA collective actions and because the cases are inapplicable to the instant facts. Specifically, one Rule 23 case upon which the plaintiff relied - Sosna - held that a class action is not rendered moot when the named plaintiff's individual claim becomes moot after the class has been duly certified. And another Rule 23 case - Geraghty - narrowly extended this principle to denials of class certification motions, holding that where an action would have acquired the independent legal status described in Sosna but for the district court's erroneous denial of class certification, a corrected ruling on appeal "relates back" to the time of the erroneous denial of the certification motion. Justice Thomas also noted that Sosna and Geraghty were Rule 23 actions, where a putative class acquires an independent legal status once it is certified under Rule 23. By contrast, "conditional certification" under the FLSA does not produce a class with an independent legal status, or join additional parties to the action.
Finally, Justice Thomas rejected plaintiff's argument that an "inherently transitory" class action claims is not necessarily moot upon the termination of the named plaintiff's claim. Justice Thomas held this line of cases was inapplicable here because the "inherently transitory" rationale was developed to address circumstances in which the challenged conduct was effectively unreviewable, because no plaintiff possessed a personal stake in the suit long enough for litigation to run its course.
The Supreme Court's Dissenting Opinion in Genesis
In a ringing dissent, Justice Kagan opined that an unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer - however good the terms - her interest in the lawsuit remains just as it was before. Therefore, plaintiff's individual claim was alive and well when the district court dismissed her suit. Justice Kagan observed that the plaintiff failed to challenge this point in her Third Circuit brief and that "enables the majority to 'assume, without deciding,' the mootness of [plaintiff's] individual claim and reach the oh-so-much-more-interesting question relating to her proposed collective action." Justice Kagan states that the "Court could have resolved this case (along with a Circuit split) by correcting the Third Circuit's view that an unaccepted settlement offer mooted [plaintiff's] individual claim. Instead, the Court chose to address an issue predicated on that misconception, in a way that aids no one, now or ever."
Conflicting Court Rulings in the Wake of Genesis Regarding The Effect of Unaccepted Offers of Judgment
While the Court's majority opinion in Genesis could be viewed as confined merely to FLSA claims, the reliance on Rule 23 case law means, as one commentator noted in a Corporate Counsel article, that the question has "naturally shifted from 'if' the Court will revisit the issue in a class action to 'when.'" Prompting this showdown are recent courts' conflicting opinions applying Genesis to class action claims. For example, the Ninth Circuit adopted Justice Kagan's dissenting opinion in Genesis that an unaccepted Rule 68 offer that would have fully satisfied a plaintiff's claim does not render that claim moot. However, other courts have gone in a completely different direction and extended Genesis to Rule 23 class actions. Two Texas district courts recently granted defendants' motions to dismiss following unaccepted offers of judgment. And two cases in the Middle District of Florida cited Genesis in support of their holdings that offers of judgment mooted the named plaintiffs' claims because they provided the plaintiffs full relief and were ruled on before plaintiffs moved for class certification.
The take-away here? Class action defendants should continue to monitor the progress of these and other courts' decisions in considering whether Rule 68 can provide a mechanism to "pick off" named class plaintiffs prior to class certification - and thus allow defendants to file a motion to dismiss for lack of subject-matter jurisdiction based on mootness because the plaintiff no longer possesses a personal stake in the outcome of the suit.