The Supreme Court’s Latest and just what is a Rule 68 Offer of Judgment Anyway?

Chances are that if you’ve paid any attention to the rising number of Fair Labor Standards Act (“FLSA”) class and collective actions around the country concerning unpaid wages or overtime, you’ve run into something called an “offer of judgment” or, more formally, a “Rule 68 offer of judgment.” We’ll get to the Supreme Court’s decision yesterday affecting the reach of an offer of judgment, but let’s start with what an offer of judgment is and why they’re important.

In the Federal Rules of Civil Procedure, there’s “Rule 68. Offer of Judgment.” Fed. R. Civ. P. 68(a) states,

At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance plus proof of service.

In wage and hour cases (where these offers of judgment are fairly common), a defendant makes an offer of judgment if it sees the writing on the wall in terms of liability, meaning that it knows it (or likely) did not properly compensate the plaintiff(s), and is willing to accept a judgment against it in exchange for a specified, monetary sum. Essentially, it’s a settlement offer with a judgment attached.

The interesting aspect of these is what can happen if an offer of judgment is not accepted.

Fed. R. Civ. P. 68(d) states, “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.” In simpler terms, if a plaintiff gambles and loses, in that s/he rejects an offer of judgment and ends up winning less than what the defendant offered, the plaintiff is on the hook for the defendant’s costs between the time of the offer and the time judgment is entered.

In 2012, the Supreme Court took the potential consequences a step further, holding in Genesis Healthcare Corp. v. Symczyk that if a plaintiff brings a collective action on behalf of her/himself and other similarly affected employees and rejects an offer of judgment that would fully satisfy the plaintiff’s own, personal claim, then the plaintiff’s claim is moot and the entire case can be dismissed unless the plaintiff can demonstrate a personal interest in representing the other class members. This was dubbed “picking off” the plaintiff, because if a defendant made such an offer and it was rejected, the defendant could avoid facing the costs and potential exposure of a collective action brought by that plaintiff.

Fast forward to yesterday, when the Supreme Court made an about face in Campbell-Ewald Company v. Gomez. In Gomez, the Court adopted Justice Kagan’s dissent in Genesis Healthcare and held that an unaccepted offer of judgment has no force. “Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties exists.” Translation: a plaintiff can no longer be picked-off in an attempt to avoid a larger, collective action.

What does this mean on a very practical level? (1) It’s time to get your attorney on the phone to setup a wage and hour audit of your workplace if you have not done one already. Class and collective actions are on the rise, a trend that we expect to continue for some time. This is particularly true with the new salary-level regulations going into effect later this year, which have a far-reaching impact; and (2) Rule 68 offers of judgment remain a useful tool for defendants in wage and hour litigation; however, offers of judgment no longer offer an avenue to halting a collective action in its tracks in their early stages.