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Supreme Court Grants Cert in FLSA Rule 68/Mootness Matter


My colleague Mark Beutler wrote a detailed blog post in March about the employer's request that the Supreme Court review the Third Circuit's decision in Symczyk v. Genesis Healthcare Corp., 656 F.3d 189 (3d Cir. 2011).  In that decision, the Third Circuit Court of Appeals held that a defendant employer may not use the Rule 68 offer of judgment mechanism to “moot” a single-plaintiff FLSA case styled as a putative collective action, even when the plaintiff has yet to seek class certification. 

Yesterday, the Supreme Court decided to hear the case. Mark explained the issues at play here better than I can.  Whatever the result of this appeal, the Supreme Court’s decision will have great impact on those of us who litigate frequently in this area.  We will keep you posted as this develops.

 

 

 

 

 
 
 
 

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.    

 

 
 
 
 

Mind the Gap: A Failure to Pay Wages Does Not Always Violate the FLSA


We recently settled a Fair Labor Standards Act retaliation case on behalf of an employer for a paltry sum that barely allowed the plaintiff’s attorney to cover his costs.  Our client was delighted.  The central problem with plaintiff’s case was that he and his attorney failed to realize from the outset that the plaintiff’s underlying complaint about not being paid for a few hours he worked on a single day – the alleged “protected activity” – was not a complaint about a violation of the FLSA, but was in the nature of a “gap time” claim.

Gap time is working time that is not covered by the overtime provisions of the FLSA because it does not exceed the 40 hour per week threshold, and is not covered by the minimum wage provisions because the employee earns more than minimum wage for the work week.  Gap time may be the subject of a common law claim for breach of contract, but it is not regulated by the FLSA.  See Thrower v. Peach County, 2010 U.S. Dist. LEXIS 116401, 13-14 (M.D. Ga. Nov. 2, 2010) (noting that the “FLSA provides no remedy for a worker who has received at least minimum wage for his or her nonovertime hours, even though they may have been paid less than their actual hourly rate…. Rather, FLSA only governs minimum wage and overtime pay violations.”); Davis v. City of Loganville, 2006 U.S. Dist. LEXIS 20798, 2006 WL 826713, at *9 (M.D. Ga. Mar. 28, 2006) (“[E]mployers are not obligated under the FLSA to compensate employees for ‘gap time,’ as long as the employees receive at least the statutory minimum wage for all nonovertime hours worked.”); Bolick v. Brevard County Sheriff's Dept., 937 F. Supp. 1560, 1568 (M.D. Fla. 1996) (“As a general rule, an employee cannot succeed on a claim under the FLSA if his average wage for a period in which he works no overtime exceeds minimum wage.”) (collecting cases).  See also http://www.dol.gov/WHD/opinion/FLSA/2004/2004_10_08_14_FLSA_GapTime.htm (Department of Labor opinion letter noting that “[a]s long as overall earnings for the workweek (exclusive of gap time pay) equal or exceed the amount due at minimum wage for all hours worked, including gap time hours, there is no violation of the FLSA in a non-overtime workweek.”). 

Because gap time is not regulated by the FLSA, it follows that an employee’s complaint about not being paid for gap time should not be deemed protected activity under the FLSA.  That is because, although a complaint need not refer to the FLSA by name, it must relate to something regulated by the FLSA.  See Moore v. Freeman, 355 F.3d 558, 562 (6th Cir. 2004); Lambert v. Ackerley, 180 F.3d 997, 1007 (9th Cir. 1999).  As the Supreme Court recently held, the complaint “must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.”  Kasten v. Saint-Gobain Performance Plastics Corp., 2011 U.S. LEXIS 2417, *23 (Mar. 22, 2011) (emphasis supplied).  See also Hardwick v. Complete Skycap Services, Inc., 2007 WL 2050867 (9th Cir. July 11, 2007) (unpublished) (“the complaints must specifically concern FLSA violations”). 

While I have not found any cases that address whether a complaint about not being paid for gap time can constitute protected activity, courts have held that complaints about other pay-related issues that are not regulated by the FLSA do not constitute protected activity.  For example, in Alvarado v. I.G.W.T. Delivery Systems, Inc., 410 F. Supp. 2d 1272 (S.D. Fla. 2006), the court held that the plaintiffs failed to make a case for retaliatory discharge under the FLSA where they alleged they were wrongfully discharged for signing and submitting two letters to the defendant requesting, among other things, an increase in salary.  The court stated: “The letters signed by the Plaintiffs…fail to meet the elements required for a prima facie case under 29 U.S.C. § 215(a)(3). The letters themselves do not appear to clearly assert rights under the statute in that they make no specific mention of overtime pay or invoke the FLSA.”  Id. at 1279. 

Similarly, in Morke v. Archer Daniels Midland Co., 2010 U.S. Dist. LEXIS 57357 (W.D. Wis., June 10, 2010), the plaintiff complained that that defendant was engaged in “payroll manipulation and conspiracy to commit fraud” by shorting plaintiff  “32 hours of vacation pay.”  Id. at  *5.  The court noted that “failure to pay vacation hours is not a violation of the FLSA because payments for vacation times are not regarded as compensation for  working.”  Id. at *5-6 (citing 29 C.F.R. § 778.219). “Thus,” the court held, “plaintiff's complaints about denial of vacation pay were not protected under the FLSA and no FLSA-based retaliation claim can arise from them.” 

The same logic should apply to complaints about an employer’s failure to pay for gap time.  At a pretrial hearing in our recent case, the judge seemed to agree, which is why we were able to settle our client’s case for a nuisance value. 

The lesson here is clear.  The next time you are defending an FLSA claim based on a failure to pay wages, consider whether the employee is complaining about a minimum wage or overtime violation, or, alternatively, whether the employee is really complaining about a failure to pay wages for gap time.  Recognizing this distinction can mean the difference between victory and defeat.

 
 
 
 
 

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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.
© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.
The opinions expressed on this blog are those of the author and are not to be construed as legal advice.