Class Action Case to Watch—Genesis HealthCare v. Symczyk

On June 25, the U.S. Supreme Court granted certiorari review of the case Genesis HealthCare v. Symczyk, 656 F.3d 189 (3rd Cir. 2011), cert. granted 80 U.S.L.W. 3512 (U.S. June 25, 2012) (No. 11-1059). In Genesis, the company seeks to overturn the Third Circuit Court of Appeals’ ruling reinstating a collective action brought under the Fair Labor Standards Act (FLSA) after the plaintiff rejected Genesis’s offer for full relief under Rule 68 of the Federal Rules of Civil Procedure (Rule 68). Under Rule 68, “a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms,” and if the opposing party accepts the offer, then judgment will be entered. Genesis asserts that the plaintiff’s rejection of the Rule 68 offer deprived her of any continuing stake in the litigation.

It is noteworthy that the Rule 68 offer was made before the plaintiff moved for conditional certification of the collective action. The district court agreed with Genesis and granted its motion to dismiss. In so doing, the district court embraced the distinction between a Rule 23 class action and an FLSA collective action. The Third Circuit, however, sided with the plaintiff, expressing concern that such settlements could allow employers to “pick off” multiple plaintiffs.

This use of Rule 68 offers of judgment in class and collective actions has received a mixed reception in the federal courts of appeal. The Ninth and Eleventh Circuit Courts of Appeal have held that a case should be dismissed when the named plaintiffs’ claims have been resolved. See, for example, Smith v. T-Mobile USA, Inc., 570 F.3d 1119 (9th Cir. 2009) and Cameron-Grant v. Maxim Healthcare Serv., Inc., 347 F.3d 1240 (11th Cir. 2003).

The Third and Fifth Circuit Courts of Appeal, relying heavily on cases involving class actions, have held that an FLSA collective action, like a class action under Rule 23, does not become moot when the named plaintiff’s claim is offered full relief. The Third Circuit’s decision in Genesis cited with approval the Fifth Circuit’s decision in Sandoz v. Cingular Wireless LLC, 553 F.3d 913 (5th Cir. 2008) (finding that although a Rule 68 offer of judgment could in theory moot an FLSA collective action, the “relation back principle applies to ensure that defendants cannot unilaterally ‘pick off’ collective action representatives and thwart availability of collective actions under the FLSA”). Under the reasoning of the Third and Fifth Circuits, all class members become parties as of the date when the complaint is filed, because in Rule 23 class actions, all persons within the class definition are considered to be a class member at the outset of a case, and thus bound by judgment, unless he or she opts out of the suit and chooses not to participate.

In its brief to the Supreme Court, Genesis argued that the Third Circuit’s analysis was improper because of the difference between class actions and FLSA collective actions. In collective actions under the FLSA, the plaintiff only represents him or herself until “similarly situated” employees opt-in and affirmatively choose to participate in the action. This critical difference between class actions and collective actions, Genesis argued, is key to deciding this case:

In collective actions, there aren’t other plaintiffs yet—so a settlement ends the issue. On the other hand, in class actions, the class exists at the start, so a settlement to only one plaintiff does not end the issue for all the other plaintiffs in the class. Because of that, it makes sense to hold that a settlement to only one plaintiff in a class action cannot end the action for all the other already-existing plaintiffs.

The Supreme Court’s statement of the question presented is:

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.

The question is framed quite broadly, so the Supreme Court’s holding may impact Rule 23 class action litigation as well as collective actions brought under the FLSA.

The Supreme Court will hear oral arguments next term, with a decision not expected until 2013.

This blog post was written by a shareholder in the Atlanta office of Ogletree Deakins.