While wage and hour class and collective actions continue to prove costly for employers, defense counsel have tinkered with different creative methods to attempt to preemptively moot an individual plaintiff’s claims prior to the conditional certification of a collective or class action. Although courts are currently split on the viability of such tactics, the Second Circuit Court of Appeals (“Second Circuit”) has left the door open for defendants to attempt a preemptive strike.
For many years, defense counsel have tried to capitalize on Offers of Judgment made pursuant to Federal Rule of Civil Procedure 68 in cases where the total liability was easily ascertainable. Defendants would offer for judgment to be taken in the full amount of potential recovery. After the passage of fourteen days, when the plaintiff’s time to accept the Offer of Judgment expired, his or her claims would become moot and there was no longer a justiciable controversy. See Genesis HealthCare Corp. v. Symczyk, 569 U.S. 66 (2013). However, in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 670 (2016), the Supreme Court held that an unaccepted Offer of Judgment does not moot the plaintiff’s claims. Rather, it operates as a legal nullity, repositioning the case’s status as a live judiciable controversy, exactly as it was prior to the Offer having been made.. While seemingly closing one door to moot a plaintiff’s claims, the U.S. Supreme Court opened another.
In its decision in Campbell-Ewald, the Supreme Court specifically noted, “We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.” Id., at 672. This opening has provided employers with a different possible mechanism to moot an individual’s claims.
The Second Circuit has given its nod of approval to the potential deposit method identified in Campbell-Ewald. In a Summary Order in Leyse v. Lifetime Entm’t Servs., 679 Fed. App’x 44 (2d Cir. 2017), the Second Circuit confirmed the District Court’s decision to enter judgment against a defendant and in favor of individual plaintiff who rejected a Rule 68 Offer of Judgment where the amount offered would have provided complete relief and was deposited with the court. The Leyse decision reaffirmed the Second Circuit’s pre-Campbell-Ewald decision permitting such entry of judgment where funds were deposited with the court. See Tanasi v. New Alliance Bank, 786 F.3d 195 (2d Cir. 2015).
Given the Second Circuit’s approval of the depositing funds method, employers in wage and hour class and collective litigation may now be able to take advantage of this procedure to resolve an individual’s claims completely, or to target federal claims to deprive a federal court of jurisdiction. This option may be particularly beneficial to New York employers, where a plaintiff would likely be able to proceed on a class wide basis. Under Federal Rule of Civil Procedure 23, plaintiffs can pursue class-wide recovery for wage notice and wage statement violations, which have a capped combined value of $10,000 per employee. However, under Article 9 of the New York Civil Practice Law and Rules, a plaintiff may not pursue class-wide recovery for those same violations, as they are considered penalties specifically excluded from Article 9 class action treatment. Thus, depriving a federal court of jurisdiction by mooting a federal claim also takes some of the sting out of any potential subsequent action that may be filed in state court by eliminating certain class claims.
While the U.S. Supreme Court has deferred judgment on these methods to a later date, they may serve as valuable and strategic tools for employers in litigation to either eliminate certain claims, or to increase pressure on plaintiffs to settle earlier in litigation.