By Guest Author: Michael A. Warner, Jr.

In recent years, one tactic for attempting to defeat wage and hour class and collective action lawsuits class action lawsuits has been to offer the named plaintiffs full relief for their individual claims in the case. Even if the offer is declined, the theory goes, the offer renders those plaintiffs’ claims moot. And under the Supreme Court’s 2013 ruling in Genesis Healthcare v. Symczyck (.pdf), if the named plaintiff’s claims become moot before a class is certified, the case goes away. No class representatives, no class, case dismissed.

However, the key premise underlying this strategy – that merely offering a plaintiff full relief renders their claim moot, even if the offer is not accepted – was never actually endorsed by the Supreme Court. In Genesis, the Court simply assumed that the named plaintiff’s claim was moot because the plaintiff didn’t argue that issue on appeal. In her dissenting opinion, Justice Kagan questioned that assumption, suggesting that the Court should have taken up the question of whether an unaccepted settlement offer can actually moot a named plaintiff’s claim and defeat a class or collective action.

Last week, the Supreme Court finally answered that question with its decision in Campbell-Ewald Co. v. Gomez (.pdf). The answer: No.

Gomez centered around a plaintiff who claimed to have received unsolicited advertising text messages in violation of the Telephone Consumer Protection Act (TCPA). The plaintiff’s lawyer filed the case as a class action. Before the deadline for class certification, the defendant made a settlement offer that would have provided the individual plaintiff with full relief if the plaintiff had accepted it. The plaintiff, however, didn’t take the bait. The defendant argued that even though the plaintiff rejected the settlement offer, the offer rendered the plaintiff’s claim moot and required dismissal of the lawsuit. The district court didn’t buy that argument, but nevertheless dismissed the case on other grounds. The plaintiff appealed to the Ninth Circuit Court of Appeals, which reversed the dismissal but agreed with the district court that the unaccepted settlement offer did not moot the class action.

The Supreme Court affirmed the Ninth Circuit’s ruling. By a 6-3 vote, the Court expressly adopted the reasoning of Justice Kagan’s prior dissent in Genesis, holding that the unaccepted offer did not moot the individual named plaintiff’s claim and, therefore, did not defeat the class action.

What This Means For Employers

The ruling in Gomez takes away one potentially useful strategic option for class action defendants, including employers defending wage and hour cases. That being said, the strategy was never widely used because of several drawbacks. First, it worked only if the defendant was willing to offer full relief to all of the named plaintiffs, and only if the plaintiff’s lawyer couldn’t find anyone else willing to step up and put their name on the case. Unless the amounts owed to each plaintiff are very small indeed, that can start to get expensive. Second, many courts were skeptical of this approach even before Gomez, making it far from a sure thing that a settlement offer would result in dismissal of the class claims.

If employers take any lesson from the case, it’s that it’s much better to deal with wage and hour issues up front by remaining in compliance than after the fact in litigation.