Monday, December 29, 2008
Ross Runkel's Employment Law Memo has this fascinating decision from the 5th Circuit Court of Appeals, finding that an employer’s Rule 68 offer of judgment to a class plaintiff in a Fair Labor Standards Act (FLSA) wage and hour case may have acted to moot a potential collective action.
The case is Sandoz v. Cingular Wireless (5th Cir 12/23/2008). Here is some of Ross' summary of the case:
29 USC Section 216 of the FLSA provides that employees may proceed in an opt-in “collective action” analogous to a class action. The court described the primary issue on appeal as “the difficult question of when an employer can moot a purported collective action under the [FLSA] …, by paying an employee’s claim in full.” The court noted that this question involves “the complex interplay between Federal Rule of Civil Procedure 68, which stipulates how a defendant can make an offer of judgment that would fully satisfy a plaintiff’s claim, and the FLSA’s provision for collective actions under Section 216(b) [of the FLSA].” . . . .
In Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240 (11th Cir 2003), the 11th Circuit concluded that the FLSA’s opt-in requirements for FLSA collective actions “prohibit what precisely is advanced under Rule 23 – a representative plaintiff filing an action that potentially may generate liability in favor of uninvolved class members.” Based on that conclusion, the 11th Circuit held that the employer’s offer of judgment satisfying all of the named plaintiff/employee’s claims mooted the employee’s claims.
The [5th Cir.] concluded, “when [the employer] made its offer of judgment, Sandoz represented only herself, and the offer of judgment fully satisfied her individual claims.” The court observed, “[i]f our analysis stopped there, Sandoz’s case would be moot.” However, the court agreed with Sandoz’ argument that dismissal of her case in this manner “would provide an incentive for employers to use Rule 68 as a sword, ‘picking off’ representative plaintiffs and avoiding ever having to face a collective action.” The court turned to the “relation back doctrine” to avoid such a result. Applying that doctrine to this context, the court held “when a FLSA plaintiff files a timely motion for certification of a collective action, that motion relates back to the date the plaintiff filed the initial complaint, particularly when one of the defendant’s first actions is to make a Rule 68 offer of judgment. If the court ultimately grants the motion to certify, then the Rule 68 offer to the individual plaintiff would not fully satisfy the claims of everyone in the collective action: if the court denies the motion to certify, then the Rule 68 offer of judgment renders the individual plaintiff’s claims moot.” The court remanded for consideration whether Sandoz timely sought certification of her collective action.
I like the innovation of the 5th Circuit approach and the ways in which avoids the pitfalls of the 11th Circuit approach. Although this sounds like an arcane issue, with the number of FLSA collective actions out there, this could turn out to be an important decisional innovation which compromises nicely the competing employer and employee interests involved.