May 2, 2013 -
Two recent cases from the U. S. Supreme Court are good news for employers defending against class and collective actions under State and Federal wage and hour laws. In Genesis HealthCare Corp. v. Symczyk the Court ruled that when the claim of an individual who sued under the was extinguished, the claims of others who might be “similarly situated,” but who had not yet joined the case, died with the original filer’s claim. The Court also let stand the lower court’s holding that a claimant who is offered full relief but rejects or ignores that offer is subject to having their case dismissed. In Comcast v. Behrend, a consumer class action case, the Court reaffirmed what it had held in Dukes v. WalMart: that difference among the plaintiffs and their claims may justify denial of class action status. It also held that courts must examine requests for class status very carefully, and not just give plaintiffs a green light. Given the popularity of both class and collective actions in wage and hour claims, these decisions definitely improve the outlook for employers defending against such claims.
Symczyk was filed as a collective action under §216(b) of the FLSA. In collective actions, other plaintiffs who are “similarly situated” to the individual filing the lawsuit must “opt in,” or file written consents to join the action. (In contrast, in class actions under Rule 23 like Behrend, everyone who has a similar claim is automatically included unless they take steps to “opt out.”)
Symczyk, a registered nurse, alleged that she and others who worked for Genesis had been denied pay because Genesis automatically deducted 30 minutes from their paid time for a daily lunch break but they often worked through lunch, missed their break, and thus were denied pay for hours worked. Early in the litigation, Genesis offered Symczyk a sum of money that represented full relief – the maximum amount she could win if she prevailed on all her claims – plus reasonable attorneys’ fees, under Rule 68 of the Federal Rules of Civil Procedure. Symczyk ignored the offer, and sought to proceed with the litigation: the district court determined that because Genesis had offered her full relief, even though she did not take it, her case was moot and should be dismissed.
Symczyk appealed, saying that even if her claim was dead, the claims of others who were “similarly situated,” having also been denied pay when they worked through meal breaks, should be allowed to proceed. The Court of Appeals for the Third Circuit agreed, and reinstated the case. Genesis asked for Supreme Court review. Its petition was granted, and the Supreme Court reversed the Third Circuit, holding that the claims of other potential plaintiffs who had not yet joined the lawsuit when it was dismissed due to Symczyk’s rejection of the Rule 68 offer did not survive the dismissal.
Perhaps the most controversial aspect of Symczyk lies in something the Court didn’t say: it let stand, without examining, the lower court’s decision condoning dismissal of the plaintiff’s case after she was offered, and refused (by ignoring the offer) full judgment satisfying her claims. An offer of judgment under Fed. R. Civ. P. 68 is an important tool in a defendant’s arsenal to short-circuit a lawsuit and avoid expensive litigation – a problem that is particularly acute in FLSA cases where the law requires the defendant to pay attorneys’ fees. If, as in Symczyk, an employer offers to pay the full amount of back wages, plus reasonable attorneys’ fees, a plaintiff who refuses that offer and continues litigation could possibly forfeit a collective action, also preventing the plaintiffs’ lawyers from collecting fees for services incurred after the date the offer is made. This is an important disincentive to lawyers eager to bring FLSA lawsuits.
Comcast was a Rule 23 “opt out” class action case. A group of customers sued the cable provider, claiming that they had been harmed because the company had created and abused a monopoly position in the market, denying them choices (and potentially lower prices) for cable service. The Supreme Court held that the case should not have been certified as a class action because individual questions regarding how different customers had been harmed predominated over class-wide questions. The Court reiterated that it had meant what it said in Dukes v. WalMart: that lower courts should probe beyond the pleadings, and conduct a rigorous analysis of the claims, before allowing a case to proceed as a class action.
Comcast matters to employers because shortly after publishing that opinion, the Supreme Court, citing Comcast, reversed and remanded to the 7th Circuit a case called Ross v. PBS Citizens, NA. Ross was a hybrid FLSA collective action/Illinois law class action where a group of former employees sued, alleging that they had been denied pay for hours worked. The Court of Appeals had affirmed a District Court decision that allowed these cases to proceed as class/collective actions: the Supreme Court said that was error, that the case should not have been so certified, and sent it back.
In both Symczyk and Comcast, the Supreme Court is making it more difficult to achieve class action status. This is important for employers because class action status makes wage and hour lawsuits more expensive and difficult to settle. The Court’s tacit approval of Rule 68 offers of judgment to moot a case may also make plaintiffs’ lawyers think twice about turning down an early (and fair) settlement.