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Employer Seeks Certiorari on Decision Defeating Effort to Avoid Collective Action by Paying Off Named Plaintiff

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. 


Another Court Dismisses FLSA Case As Moot… But Questions Still Remain About the Mootness Doctrine Following Dionne v. Floormasters

A Florida federal court recently dismissed an FLSA action as moot, thereby denying plaintiff’s counsel a fee recovery, after plaintiff’s counsel deposited a check representing full compensation for plaintiff’s actual and liquidated damages.

But in her decision in Craig v. Digital Intelligence Systems Corp., Case No. 8:10-CV-2549-T-EAJ (M.D. Fla., November 2, 2011), Judge Elizabeth Jenkins of the United States District Court for the Middle District of Florida ruled that the Eleventh Circuit Court of Appeals’ decision in Dionne v. Floormasters, 647 F.3d 1109 (11th Cir. 2011) – in which the Eleventh Circuit affirmed the dismissal of an FLSA case on mootness grounds – was not controlling, because “plaintiff in Dionne agreed that his claim was moot and should be dismissed. . . .  As a result, the Eleventh Circuit did not address the district court’s ruling that the action was rendered moot by the defendant’s tender of full compensation.”

In deciding that issue, Judge Jenkins declined to follow a recent ruling by Middle District Judge James Whittemore in Klingler v. Phil Mook Enters., Inc., No. 8:11-CV-1586-T-27TGW, 2011 U.S. Dist. LEXIS 110205 (M.D. Fla. Sept. 14, 2011).  In Klingler, Judge Whittemore ruled that allowing the defendants to avoid responsibility for attorney’s fees would run counter to the FLSA’s goal of fully compensating a wronged employee and that the tender was an attempt to circumvent the requirements of Rule 68.  Judge Jenkins wrote that “the issue of attorney’s fees is collateral to the merits of Plaintiff’s FLSA claim. And Klingler is distinguishable from the present case because the plaintiff in Klingler denied receiving the tender payment.”  In contrast, Judge Jenkins noted:

Plaintiff’s acceptance and endorsement of a check for full compensation for damages, coupled with the deposit of the funds in the law-firm trust account, rendered his claims moot. Here, it is undisputed that Plaintiff and his counsel accepted the check even though his counsel was on notice that the check was tendered for the purpose of mooting Plaintiff’s claim. Plaintiff endorsed the check, and his counsel deposited it in the law-firm trust account. That the check was in Plaintiff’s name and he endorsed it strengthens the conclusion that Plaintiff accepted the tender of full compensation for damages.

Judge Jenkins went on to hold that plaintiff did not have a right to an award of attorney’s fees and costs under the FLSA because plaintiff was not the prevailing party:

There has been no adjudication on the merits of Plaintiff’s claim, and Digital’s tender of damages does not include an offer of judgment on specified terms pursuant to Rule 68, Fed. R. Civ. P. Further, the parties are not seeking judicial approval of a settlement of Plaintiff’s claim. Consequently, none of the three conditions that would entitle Plaintiff to prevailing party status have been met.

But would Judge Jenkins have ruled differently if plaintiff had not endorsed the check? Perhaps. In her decision, Judge Jenkins cited approvingly to Judge Kenneth Ryskamp’s decision in Gathagan v. Rag Shop/Hollywood, Inc., No. 04-805200-CIV, 2005 WL 6504749, at *1 (S.D. Fla. May 9, 2005), in which the court commented that instead of trying to revoke the acceptance, the proper procedure for protecting a plaintiff’s right to an attorney’s fee award would be for counsel to “instruct his client to delay acceptance of a tender until a satisfactory fee arrangement is reached or the parties agree that the tender represents an offer of settlement or judgment.”

So where does that leave us in the post-Dionne world of FLSA litigation?  Suppose the defendant tenders full compensation to the plaintiff, but the plaintiff rejects the tender, or delays it in an attempt to reach a fee arrangement with defense counsel, or an agreement that the tender represents an offer of settlement or a judgment.  What should the defendant do then?  Shouldn’t defendant take the position that the tender of full compensation itself renders the case moot, regardless of whether the plaintiff accepted the tender?  Judge Ryskamp’s earlier decision in Gathagan suggests that this is exactly what the defendant should do:

The mootness doctrine applies to FLSA actions. Cameron-Grant v. Maxim Healthcare Services, Inc., 347 F.3d 1240, 1244 (11th Cir. 2003).  Defendant's tender of Plaintiff's maximum recoverable damages has rendered her case moot, and the motion to dismiss with prejudice is granted.  Buckhannon, 532 U.S. at 601, 121 S.Ct. at 1838.

Gathagan v. The Rag Shop/Hollywood, Inc., 2005 U.S. Dist. LEXIS 47235, 6-7 (S.D. Fla. Feb. 9, 2005).  Precedents from other circuits hold that a plaintiff cannot avoid mootness by rejecting an unconditional tender of amounts owed. See Rothe Development Corp. v. Department of Defense,  413 F.3d 1327, 1331 (Fed. Cir. 2005)(a plaintiff may not prolong a case merely by refusing to accept a valid tender); Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994) (a plaintiff “may not spurn this offer of all the damages he is owed and proceed to trial”).  This appears to be true in FLSA cases. See Thomas v. Interland, Inc., 2003 WL 24065651, *3 (N.D. Ga. 2003)(“Courts have repeatedly held that a plaintiff's claim becomes moot when a defendant offers the plaintiff all relief he could receive if his claim were fully litigated, even if the plaintiff does not accept such offer.”).


Is that the law in FLSA cases that are decided post-Dionne, or isn’t it?  It may take another decision by the Eleventh Circuit to resolve this issue once and for all.  Until then, I think we are going to see many district court decisions in the Eleventh Circuit grappling with these questions. 



Tampa District Court Breathes Life into “Catalyst Theory,” Challenging Eleventh Circuit

By Mark Beutler

On this blog, my colleague Kevin Vance previously reported the July 28, 2011 decision of the Eleventh Circuit in Dionne v. Floormasters Enterprises, Inc., ___ F.3d. ___, 2011 WL 318977 (11th Cir. July 28, 2011).  That case involved a claim for unpaid overtime under the FLSA.  During the litigation, the employer tendered full payment of the amount sought by the plaintiff for unpaid overtime and for liquidated damages and interest.  The employer thereafter moved to dismiss the case for lack of subject matter jurisdiction under the theory that the tender mooted the above-stated claims, and there was no longer a case or controversy.  The Plaintiff admitted that the overtime claim was moot and should be dismissed, but filed a motion for prevailing party attorney’s fees.  The court rejected the fee motion and awarded the Plaintiff’s counsel no attorney’s fees.  The Plaintiff appealed, arguing that filing the lawsuit served as a “catalyst” for the employer’s eventual payment, and that the plaintiff was the “prevailing party” entitled to attorney’s fees. 

The Supreme Court in Buckhannon Board and Care Home, Inc. v. West Virginia Dep’t of Health and Human Resources, 532 U.S. 598 (2001), had previously rejected the “catalyst theory” for prevailing party status, albeit in the context of the Fair Housing Authority Act (FHAA) and the public accommodations provisions of the Americans with Disabilities Act (ADA).  The Buckhannon Court held that, once the accessibility deficiencies had been corrected and the claims under those statutes were moot, the plaintiff could not recover attorney’s fees.  The Court reasoned that, without a judgment on the now mooted claims, the plaintiff was not a “prevailing party” under the fee shifting statute (42 U.S.C. § 1988).  That fee shifting statute provides for plaintiffs to recover attorney’s fees for violations of several civil rights statutes, but only if the plaintiff is a “prevailing party.”  Prior to Buckhannon, all circuits other than the Fourth Circuit permitted plaintiffs to recover attorney’s fees under the catalyst theory.  The Buckhannon Court resolved the conflict among the circuits and made the law of the Fourth Circuit the law of the land. 

The issue for the Eleventh Circuit in Dionne was whether the logic of Buckhannon applied in the FLSA context.  The FLSA, unlike Section 1988, does not use the “prevailing party” language but permits recovery of attorney’s fees “in addition to any judgment awarded to the plaintiff.”  The Eleventh Circuit affirmed the district court and held that “[t]he FLSA plainly requires that the plaintiff receive a judgment in his favor to be entitled to attorney’s fees and costs.”  The Dionne Court held that, if the underlying claim for FLSA violations was satisfied by tender of amounts owed, the claims were moot, there would be no judgment on those claims, the plaintiff therefore was not a prevailing party, and the plaintiff could not recover attorney’s fees. (Subsequent to Dionne, the Seventh Circuit reached the same conclusion under the FMLA, which uses the identical fee shifting language as the FLSA. See Breneisen v. Motorola, Inc., ___ F.3d ___ , 2011 WL 3873771 (7th Cir. September 2, 2011)).  

It did not take long for an employer involved in FLSA litigation to attempt to replicate the successful tactic used by the employer in Dionne.  In Klinger v. Phil Mook Enterprises, No. 11-1586 (M.D. Fla. September 14, 2011), the employer tendered the full payment owed to the plaintiff and promptly moved to dismiss the case as moot.  In its motion, the employer curiously did not mention Dionne, but the parallel to Dionne was unmistakable. 

The plaintiff, Stephanie Klinger, opposed the employer’s motion to dismiss on several grounds.  Klinger argued that tender of the backpay, liquidated damages and interest did not provide her with all the relief she sought.  Specifically, she also sought an enforceable judgment on the backpay and liquidated damages claims, and also sought attorney’s fees to which she contended she was statutorily entitled.  In addition, Klinger argued that settlement of FLSA claims requires court approval. 

Klinger also advanced a policy argument.  The FLSA, by providing for the payment of plaintiff’s attorney’s fees, was designed to remove the economic bar to litigation where the employee’s rights were being violated.  By permitting the employer to dismiss a case and escape liability for plaintiff’s attorney’s fees merely by tendering payment of only backpay, liquidated damages and interest, the plaintiff would have to pay her own lawyer, and recovery of small amounts of backpay through litigation would be economically infeasible.  To permit the employer to escape liability for attorney’s fees would thus subvert the FLSA policy of removing that economic bar. 

Klinger weaved through these broad positions various bases on which to distinguish Dionne.  Klinger argued that (a) the Plaintiff in Dionne did not seek court approval of the “settlement” (settlements of FLSA cases ordinarily require court approval) whereas she intended to petition the court for approval of the “settlement”; (b) the plaintiff in Dionne agreed that the case had been mooted whereas she did not agree that the case was mooted;  and (c) the plaintiff in Dionne was not seeking a judgment whereas she was seeking a judgment. 

In a brief Order, the district court in Klinger denied the motion to dismiss.  The court’s reasoning, like the arguments of the plaintiff, is at times abstruse. 

The court accepted the argument that Dionne was distinguishable because “[i]n Dionne, the plaintiff agreed that his FLSA claim was moot and should be dismissed.  As a result, the Eleventh Circuit was not required to address the district court’s ruling that the action was rendered moot by the defendant’s tender.”  As a factual matter, the court’s premise is simply untrue.  The plaintiff in Dionne conceded that the overtime claim was moot.  The plaintiff did not concede that the case was moot (to the contrary, the plaintiff had appealed the district court’s ruling).  In Klinger (as in Dionne), it was undisputed that all amounts owed, other than attorney’s fees and costs, had been fully tendered.  In this respect, Dionne and Klinger were identical. 

The court also accepted the plaintiff’s argument that permitting the employer to escape liability for the plaintiff’s attorney’s fees after litigation commenced would run afoul of the FLSA’s goal of fully compensating the wronged employee.”  That precise argument was advanced to no effect by the plaintiff in Dionne (and Buckhannon in a non-FLSA context). 

Finally, the Klinger court reasoned that the employer’s tender effectively circumvents the requirements of Fed. R. Civ. P. 68, which deals with offers of judgment.  This position too is wrong.  Rule 68 deals with offers of judgments which are, in essence, settlements where the parties agree on entry of a judgment in exchange for release of a claim.  Nothing in Rule 68 prevents an employer from unconditionally tendering money owed to its employee, and that is true even if the amount is disputed in whole or in part.  (The same rebuttal would apply to plaintiff’s argument regarding the requirement that settlements of FLSA claims be approved by the court.  That rule applies only to settlements, not unconditional tenders.)           

The court accepted the plaintiff’s argument that “mere tender of payment does not provide plaintiff with all the relief she seeks and would be entitled to as a prevailing party in this action, to wit: an enforceable judgment, attorney’s fees, and costs.”  The court’s rationale places the cart before the horse.  Dionne and Buckhannon both hold that a plaintiff is not a prevailing party unless the plaintiff first obtains an enforceable judgment on the underlying fee shifting claim, which the plaintiff cannot do if the underlying claim becomes moot.  The preliminary inquiry is whether the fee shifting claim is moot as a consequence of the tender.  The Klinger Court turned the inquiry on its head and held that, because the plaintiff will not obtain an enforceable judgment and thereby recover her attorney’s fees, the underlying claim cannot be dismissed as moot. 

The mootness doctrine arises from the Constitution’s limitation on federal judicial power.  Federal courts have no subject matter jurisdiction to adjudicate claims that have become moot.  Mootness, like all jurisdictional inquiries, are resolved prior to addressing other issues.  If a federal court lacks jurisdiction over a claim, it cannot resolve the claim and, hence, cannot determine which party prevailed on the claim.  Thus, if a claim becomes moot, that will necessarily eliminate the plaintiff’s ability to turn the claim into a judgment.  Mootness, by its very nature, is always an obstacle to obtaining a judgment.  The court’s refusal to dismiss the backpay-related claims for mootness – on the reason that doing so would bar the plaintiff from obtaining a judgment on those claims – is contrary to logic. 

In many contexts, tender of all amounts owed on a claim moots the claim. E.g., Rothe Dev. Corp. v. Dep't of Def., 413 F.3d 1327, 1331 (Fed. Cir. 2005).  A plaintiff cannot avoid mootness by rejecting of the tender. E.g., Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994).  A plaintiff must demonstrate standing separately for each form of relief sought. E.g., Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 185 (2000).  Thus, the fact that the plaintiff seeks relief (e.g., attorney’s fees) in addition to backpay will not prevent the backpay claim from being rendered moot by a tender of all disputed backpay.  For these reasons, many cases – including Buckhannon and Dionne -- have held that a claim for attorney’s fees will not cure the mootness or other jurisdictional defect in an underlying fee shifting claim and thereby permit the court to award attorney’s fees. E.g.Lewis v. Continental Bank Corp., 494 U.S. 472, 480 (1990). 

The Klinger Court’s decision is best understood as a rejection of Dionne and Buckhannon.  Employers should not quickly abandon the successful approach used by the defendant in Dionne as a better reasoned decision may go the other way. 

An approach employers may want to consider is to separate the mootness issue from the attorney’s fees issue.  The employer, after tendering all backpay and liquidated damages, can move to dismiss as moot only the backpay and liquidated damages claims, and leave for another day the fight over attorney’s fees.  The plaintiff will have a difficult time arguing that the claims are not mooted by the tender.  Once the court dismisses the backpay and liquidated damages claims as moot, in light of Dionne, the plaintiff will have a difficult time arguing that he is a prevailing party entitled to attorney’s fees.    



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Michael W. Casey III, Kevin E. Vance, Mark J. Beutler, and Teresa M. Maestrelli practice labor and employment law, with a particular focus on labor and employment litigation, including Title VII, ADEA, ADA, Florida Civil Rights Act, and whistleblower claims, as well as non-compete litigation, in state and federal trial and appellate courts in Florida and throughout the United States. They also represent employers before the National Labor Relations Board (NLRB), the National Mediation Board (NMB), the U.S. Department of Labor, including the Wage and Hour Division and the Occupational Safety and Health Administration (OSHA), the Equal Employment Opportunity Commission (EEOC), and various state and local agencies, as well as in arbitrations, collective-bargaining negotiations and union representation elections. Hector A. Chichoni practices in the area of US and global immigration law. He chairs Duane Morris's Florida Immigration Practice. The editors of Chambers USA 2010 also selected Mr. Chichoni as a "Leader in the Immigration Field." He has represented a vast number of corporate and individual clients throughout his career ranging from premier US health care organizations, Fortune 100 and Fortune 500 companies, multinational corporations and universities to doctors, professors, researchers and students. His international experience includes handling matters relating to export controls and global corporate compliance and business transactions. He has represented clients in a wide variety of cases before the US Immigration Court.
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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.