Labor & Employment Law

I Told You So: The Offer Of Judgment Works!

By Mark E. Tabakman, Esq.

A few weeks ago, I posted about a procedure that could be used to defeat FLSA collective actions before they got started. That was the Offer of Judgment procedure under Federal Rule of Civil Procedure 68. Although there were cases previously approving that dismissal process, there seems to be the beginning of a tide.  Only a few days ago, a federal judge has dismissed a class action against United Mortgage and Loan Investment LLC, on the basis that the court lacked subject matter jurisdiction because the defendants had offered the plaintiffs the maximum they could recover, which they turned down.  That simple scenario is the essence of the Offer of Judgment process.

In this case, docketed as Simmons v. United Mortgage and Loan Investment, LLC et al., the U.S. District Court for the Western District of North Carolina dismissed the case and denied the plaintiff's motion for conditional collective action certification.  This was because the 'defendants' May 16, 2008, offer of judgment mooted the action, depriving this court of subject matter jurisdiction.'

As the plaintiffs rejected the offer, they will receive nothing. This really points out the dangers for continuing to litigate when a plaintiff has already been offered everything they could conceivably win. In my view, this represents a (hopefully) growing trend of the federal courts showing that when a plaintiff refuses to resolve a case at an early stage in the litigation process, there are consequences that flow, i.e. dismissal of the case and not receiving the originally offered money (or any portion of it).

Significantly, the May 2008 Offer gave the plaintiffs all they could have won at trial, i.e., back pay, liquidated damages, attorneys' fees and costs. When they did not take the offer, the result was that the active case or controversy, which is what is needed for a court to maintain jurisdiction, was dissolved.

The Judge agreed there were concerns relating to a defendant-employer's ability to 'pick off' FLSA plaintiffs and moot a collective action before it got started.  Rule 68 does exist for a reason, however, and it is there to be used, in the appropriate circumstances.  In this regard, under the FLSA's opt-in mechanism, only those individuals who affirmatively choose to join a particular suit are actually in it, so an individual who has tried to opt in to a collective action that is mooted through an Offer of Judgment may nevertheless pursue his own case.

I believe this is a very viable mechanism for an employer trying to stop FLSA cases at an early stage, before legal fees mount up and before other putative plaintiffs join in and, especially, before a class gets certified. The key lies in melding proactive action with making the Rule 68 Offer. If the employer is doing something wrong (e.g. misclassification of employees as exempt), it must fix the problem before it makes the Offer of Judgment so that the one active case gets dismissed and even if others then come forward, there will be nothing for them to glom on to, as the problem has been solved and the danger eradicated..
 

Full post as published by Wage & Hour - Development & Highlights on September 23, 2009 (boomark / email).