Guest post by Thomas D. Rowe, Jr., Elvin R. Latty Professor Emeritus, Duke University School of Law
A spectre is haunting aggregate litigation–the spectre of “pick-off” offers.
To begin close to the beginning: Somewhat incredibly, the law in the Seventh Circuit has long been that a putative class representative who receives but does not accept a full-satisfaction Rule 68 offer of judgment suffers mooting of the action, with the consequence that the case is dismissed for lack of subject-matter jurisdiction and the plaintiff takes nothing.1 To be fair, these were cases in which class certification had been denied; and not all federal courts agree with the Seventh Circuit that the plaintiff with a claim mooted by an unaccepted full-satisfaction offer loses outright.2
Readers not already immersed in the arcana of formal Rule 68 offers of judgment may need a bit of background before I get to the spectre posed by the Supreme Court’s recent decision in Genesis Healthcare Corp. v. Symczyk. Federal Rule of Civil Procedure 68 permits a party defending against a claim to serve “an offer to allow judgment on specified terms, with the costs then accrued.” If the opposing party accepts within 14 days, the court clerk must enter judgment. The kicker (and the incentive for defendants to make formal offers of judgment, not just offer terms in settlement negotiations) is that if the offeree doesn’t accept and obtains a judgment that “is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.”
Defendants in small-claim class or collective actions, such as those under the Fair Debt Collection Practices Act (“FDCPA”) or the Fair Labor Standards Act (“FLSA,” which provides for opting in by other claimants rather than the opt-out approach of a damages class action under Federal Rule of Civil Procedure 23) have long tried to use Rule 68 to pay off individual claimants and avoid facing broader liability. There’s quite a bit of lore in the area and conflicting decisions on various fine points, but many federal courts have shown concern about letting formal offers “pick off” named plaintiffs. They have responded with such approaches as holding that a timely motion for class certification makes a granted certification relate back to the date of filing, keeping a full-satisfaction individual offer to the putative class representative or representatives from mooting the action.3
So there was reason to wonder what the Supreme Court might do when it granted certiorari to review a Third Circuit no-mootness decision, Symczyk v. Genesis HealthCare Corp. In that case the court of appeals held that the Rule 23 relation-back approach extended to the opt-in context of an FLSA action, even when no other potential plaintiff had opted in by the time of the Rule 68 offer, again assuming a timely motion to certify the collective action. “We believe the considerations warranting application of the relation back doctrine to Rule 23 class actions also apply to [FLSA] collective actions.” But the question presented, as framed in the petition for certiorari, was not limited to FLSA cases, or for that matter even to formal Rule 68 offers: “Whether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff’s claims.”
In the end, the ideologically split Supreme Court’s 5-4 decision went off on narrow grounds: Justice Thomas’s majority opinion views the Court as bound, for lack of a cross-petition and also because of waiver, by the finding of the courts below that the defendant’s offer did moot the plaintiff’s claim. Hence the Court doesn’t reach the question, which has divided the courts of appeals, “whether an unaccepted offer that fully satisfies a plaintiff’s claim is sufficient to render the claim moot.”
Proceeding from the premise that the plaintiff’s claim was moot, the majority holds that the Court’s class-action relation-back cases4 don’t apply in the context of FLSA opt-in collective actions. Behind the majority’s refusal to apply these precedents to the analogous FLSA context where the “pick-off” concern also applies may be a dislike of those decisions. But rather than questioning them Justice Thomas’s opinion distinguishes the relation-back cases, on the ground that a “conditional certification” in an FLSA action–unlike class certification in a case under Rule 23–“does not produce a class with an independent legal status, or join additional parties to the action.” Rather, its “sole consequence . . . is the sending of court-approved written notice to employees, who in turn become parties to a collective action only by filing written consent with the court.” (Query the significance of this distinction: As in a Rule 23 class action, an effort to moot an individual claim in the FLSA collective-action context is a ploy designed to frustrate the goal – here a statutory one – of authorizing aggregate litigation.)
The bottom line is that the plaintiff “has no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.” It follows that the district court had correctly dismissed the case for lack of subject-matter jurisdiction. The Supreme Court mentions in a footnote the divide between lower courts over whether a court may enter judgment on an unaccepted full-satisfaction Rule 68 offer, but only in the context of saying that the courts of appeals on both sides of the question whether such an offer suffices to moot a putative class or collective action seem to agree “that a plaintiff’s claim may be satisfied even without the plaintiff’s consent.” So the Court appears to have left for another day the question whether a plaintiff who doesn’t accept such an offer takes nothing. Here, along with the Court’s avoidance of the question whether an unaccepted full-satisfaction offer does moot a putative Rule 23 class-action or FLSA collective-action representative’s individual claim, is the basis for the reference in my subtitle to losing small. All the Court decided is that if the offer does moot an FLSA plaintiff’s claim, she’s out of court.
Justice Kagan’s opinion for the four dissenters goes beyond her usual verve with, to me, surprisingly strong and repeated ridicule of the majority’s opinion. (Maybe she’s been around Justice Scalia long enough to conclude that the best defense is sometimes a good offense.) Still, she makes a powerful argument that may influence lower courts – which haven’t, to my knowledge, sufficiently considered the point – on the main issue left undecided by the majority opinion: Hey, everybody, Rule 68(b) specifies, “An unaccepted offer is considered withdrawn . . .,” so the plaintiff still has the same unsatisfied claim she had before the offer was made. Mootness? Not on an unsatisfied damages claim. Writing with a confidence that’s somewhat puzzling in light of the majority’s noting lower-court agreement “that a plaintiff’s claim may be satisfied even without the plaintiff’s consent,” she offers “a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a message to all other courts of appeals: Don’t try this at home.”
The foregoing, the dissent argues, “conflicts with nothing in the Court’s opinion.” Cannily, Justice Kagan avoids the temptation of wailing about the broad effects of a decision, to which dissenters and critics often succumb. “Feel free to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise,” because “no similar claim for damages will ever become moot.” She tees off on the majority for various procedural reasons, such as that there’s no waiver or problem from lack of a cross-petition because a “‘party satisfied with the action of a lower court should not have to appeal from it in order to defend a judgment in his or her favor on any ground.’” In Justice Kagan’s view, the relation-back cases play no proper role in this situation because the mootness problem cannot arise unless a court mistakenly creates it. So the majority’s decision “has no relevance,” because it “addresses an issue predicated on [the] misconception” that “an unaccepted settlement offer mooted [the plaintiff’s] individual claim,” “in a way that aids no one, now or ever.”
And in any event, the majority’s distinguishing of the Rule 23 relation-back cases seems to make it hard to infer anything from the Court’s decision about the effect of full-satisfaction offers in regular class actions as opposed to FLSA opt-in cases. Again, a reason (on top of Justice Kagan’s arguments) for regarding Symczyk as a pretty small loss – at least for the moment!
Thomas D. Rowe, Jr., is Elvin R. Latty Professor Emeritus, Duke University School of Law, and author of the chapter on Federal Rule of Civil Procedure 68 in Moore’s Federal Practice (3d ed. 2013). Thanks to Professors David Shapiro and Susan French for comments on an earlier draft. Surviving errors are, of course, mine.
1. Greisz v. Household Bank (Illinois), N.A., 176 F.3d 1012, 1015 (7th Cir. 1999) (Posner, C.J.) (“You cannot persist in suing after you’ve won”; affirming dismissal of suit); Rand v. Monsanto Co., 926 F.2d 596, 597-98 (7th Cir. 1991) (Easterbrook, J.) (“When [the plaintiff] refused the [Rule 68] offer, the district court properly entered judgment against him. Once the defendant offers to satisfy the plaintiff’s entire demand, there is no dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright . . .”) (citations omitted).2. See, e.g., O’Brien v. Ed Donnelly Enterprises, Inc., 575 F.3d 567, 575 (6th Cir. 2009) (“we believe the better approach is to enter judgment in favor of the plaintiffs in accordance with the defendants’ Rule 68 offer of judgment”); Greif v. Wilson, Elser, Moskowitz, Edelman & Dicker LLP, 258 F. Supp. 2d 157, 161 (E.D.N.Y. 2003) (ordering entry of “judgment against the defendant in accordance with its Rule 68 offer of judgment”).3. See, e.g., Weiss v. Regal Collections 385 F.3d 337, 345 (3d Cir. 2004) (“Allowing defendants to ‘pick off’ putative lead plaintiffs contravenes one of the primary purposes of class actions–the aggregation of numerous similar (especially small) claims in a single action.”).4. United States Parole Comm’n v. Geraghty, 445 U.S. 388 (1980); Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326 (1980); Sosna v. Iowa, 419 U.S. 393 (1975).