On February 17, 2012, Genesis HealthCare Corporation asked the U.S. Supreme Court to review a Third Circuit decision holding that employer defendants could not avoid conditional class certification and dispatch of the class notice by paying the plaintiff all amounts sought by her in the lawsuit. The case is Symczyk v. Genesis Healthcare Corp., 656 F.3d 189 (3d Cir. August 31, 2011), petition for cert. filed, ___ U.S.L.W. ___ (U.S. February 18, 2012) (No. 11-1059). Because the decision directly conflicts with Eleventh Circuit precedent, if the Supreme Court grants certiorari and affirms, that will likely change the law in this circuit.
In Genesis, the employer served the plaintiff with a rule 68 offer of judgment for $7,500, which represented all amounts potentially recoverable by the lone plaintiff. The offer was made before a conditional class certification motion was filed. The offer was rejected but, under settled law, a plaintiff cannot keep a claim alive by rejecting all relief potentially recoverable. The district court held that the plaintiff’s claims were moot, and dismissed the suit. The Third Circuit reversed.
The Third Circuit acknowledged that ordinarily a Rule 68 offer for all relief would moot the plaintiff’s claims. However, the court reasoned that, in the collective action context, the purposes underlying Rule 68 in resolving claims were being frustrated and were in tension with the purposes of the FLSA’s collective action provisions which were intended to avoid piecemeal litigation and provide a mechanism to efficiently resolve similar low value claims that could not be economically litigated as stand-alone claims. The court concluded that "[d]epriving the parties and the court of a reasonable opportunity to deliberate on the merits of collective action conditional certification frustrates the objectives served by [the FLSA]." The court remanded the case to the district court and directed that notice be issued to the class (subject to resolution of other issues not relevant here).
In Genesis, the Third Circuit followed the logic of the Fifth Circuit in Sandoz v. Cingular Wireless, 553 F.3d 913 (2008), which held that employers could not use Rule 68 to “pick off” plaintiffs and avoid a collective action. The Genesis Court, like the Sandoz Court before it, focused on the relation back doctrine and Rule 68. Both issues are largely distractions.
Following the logic in Sandoz, the Third Circuit borrowed jurisprudence from Rule 23 class actions. The claims of class members relate back to the filing of the complaint even though the certification of the class occurs much later. The Supreme Court in Sosna v. Iowa, 419 U.S. 393, 399 (1975), held that that once a Rule 23 class has been certified, mooting a class representative's claim does not moot the entire action because the class “acquire[s] a legal status separate from the interest asserted by [the named plaintiff].” Courts have cited that holding when refusing to moot Rule 23 class actions where the named plaintiffs were paid off.
The relation back argument is ill-suited in the FLSA context. Unlike Rule 23, claims of class members under the FLSA do not relate back. Every class member has a different “filing” date for purposes of the statute of limitation based on the date the consent to opt-in is filed with the court.
The Genesis Court acknowledged that the real issue is the dispatch of the notice incident to conditional certification. But rather than addressing the issue directly, the Third Circuit reasoned that the conditional certification issue “relates back” to the filing of the case. That is a strange way to approach the problem, and it is an approach particularly ill-suited in the FLSA context where it is never the case that claims of class members relate back to the date the lawsuit is filed. But that is the court’s holding: "When an FLSA plaintiff moves for certification of a collective action, the appropriate course ... is for the district court to relate the motion back to the filing of the initial complaint.” It is hard to imagine that the court would follow that approach if the named plaintiff sought solely equitable relief under the FLSA, but the employer went out of business after the case was filed. The court would dismiss the case as moot even though there was no mootness problem at the time the case was filed.
The Court’s discussion of Rule 68 is similarly unnecessary. The problem for the plaintiff is that her claims for monetary relief are moot. The fact that mootness was accomplished through Rule 68 is not important. If the settlement had been made outside the context of a Rule 68 offer of judgment, the result would be the same. The same would be true if the employer tendered the full amount of the claimed backpay and liquidated damages, and demanded no release in exchange. If the Genesis plaintiff cannot claim that the employer owes her any money above the amount tendered in satisfaction of her claims, her claims are moot. The Court’s conclusion that the case is not moot despite the payment of all amounts owed to the plaintiff is a clumsy way of saying that the conditional certification should proceed notwithstanding that the named plaintiff’s claims are in fact moot.
In its petition to the Supreme Court, Genesis argues that, under basic legal principles, “an offer to accord all relief that a plaintiff demands renders a case moot, unless the plaintiff retains some additional stake in the litigation.” Because neither the plaintiff nor her attorneys represent the potential claimants, there is no person presently before the court with a stake in the outcome of the case as required for Article III standing. Genesis further argues that the “idiosyncratic policy intuitions” of individual judges cannot substitute for the personal stake in the outcome of the case required for Article III standing. Accordingly, the court lacks jurisdiction to continue the litigation.
The decision of the Third Circuit in Genesis presents a direct conflict with the 11th Circuit’s decision in Cameron-Grant v. Maxim Healthcare Serv., Inc., 347 F.3d 1240 (11th Cir. 2003), which held that a pre-certification payment of all amounts potentially recoverable under the FLSA moots the plaintiff’s FLSA claims and precludes further litigation. The Ninth Circuit, in an analogous context, ruled that an FLSA plaintiff that settled his individual claim had no standing to appeal an adverse decision on class certification. See Smith T-Mobile USA, Inc., 570 F.3d 1119, 1122-23 (5th Cir. 2009).
The odds of the Supreme Court granting certiorari are very long, even in cases like this which present a clear conflict among the circuits. However, if the case finds its way to the court’s docket, and is affirmed, the decision could remove an important weapon from the arsenal of employment defense lawyers seeking to defeat collective actions.