9th Cir. Opinion Is “Terrible” for Employers

The legal maxim, “bad cases make bad law” was applied in full in a recent decision by the Ninth Circuit. In Pitts v. Terrible Herbst, Inc., the plaintiff-employee, Gareth Pitts, filed a complaint in Nevada state court, alleging that his employer, Terrible Herbst, Inc., had failed to pay him and other similarly situated employees overtime and minimum wages in violation of the FLSA, state labor laws, and state breach-of-contract laws. The employee alleged a mere $88 in unpaid wages.

Procedural Background

The employer removed the case to federal court and the district court entered a scheduling order. The employee served a discovery request in which he sought a list of the names and addresses of all of Terrible’s employees “who work or have worked in [its] retail locations . . . on an hourly . . . basis.” Terrible refused to produce the information. The case law on this question-whether, in a collective FLSA action, an employer must produce the names and contact information of all employees in the putative class before a class has been certified-differs between jurisdictions. Some courts require that this information be produced, even when no class has been certified and others do not require it until there has been at least a conditionally certified class.

The employee filed a motion to compel Terrible to produce the requested information. The magistrate judge heard arguments on the motion but hadn’t yet ruled on it when the discovery period was scheduled to end. The employee moved to extend the discovery schedule, in light of the pending motion to compel. The motion to extend was granted and the motion to compel remained undecided.

In the meantime, Terrible made an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure in the amount of $900. Keep in mind-the employee had alleged he was owed $88 in back wages. The offer of judgment was for more than ten times the amount of damages the employee claimed he was owed. The offer also provided for costs and reasonable attorney’s fees-both are necessary if the offer is to constitute an offer of full relief under the Federal Rules in an FLSA case. The employee, for reasons unexplained, did not accept the offer.

The District Court’s Decision

The employer filed a motion to dismiss, arguing that, because it had offered to fully compensate the employee for all damages that he sought, including reasonable fees and costs, the court lacked subject-matter jurisdiction to hear the case. In other words, there was no longer a live case or controversy that required a decision by the court-the employee’s refusal of the offer of judgment had rendered his claim moot. The district court denied the motion and held that a Rule 68 offer of judgment does not moot a putative class action, so long as the class representatives can still file a timely motion for class certification.

Nevertheless, the court went on to conclude that, despite there being no deadline for the employee to file a motion for class certification, the employee had “pushed beyond the limits of timeliness in waiting for certification” and that the employee’s “failure to move for class certification before the initial deadline for discovery demonstrates untimeliness on his part” and dismissed the entire action with prejudice for lack of subject-matter jurisdiction, entered judgment in the defendant’s favor, ordered the employer to pay $900 to the employee and $3,500 to the employee’s attorneys.

Huh? If you’re confused, you’re in good company. But wait, there’s more.

In the same order, the court dismissed the state-law wage claim on alternative grounds. The court concluded that a Rule 23 class action is inherently incompatible with an FLSA collective action and, when both actions are brought together, only the FLSA action may proceed. This conclusion was reached despite the fact that the employee had previously agreed to waive his FLSA claim, although he had not yet amended his complaint to reflect that waiver.

The 9th Circuit’s Decision

On appeal, the Court of Appeals for the Ninth Circuit had a fine time trying to straighten out the district court’s ruling. Unfortunately, the appellate court fared only mildly better than the trial court in ruling on the several issues raised on appeal. For the purposes of this post, though, I’ll limit the discussion to the mootness issue.

Specifically, the court was asked whether a putative class action becomes moot when the named plaintiff receives an offer of settlement that fully satisfies his individual claim before he files a motion for class certification. The court answered in three parts as follows:

(1) If a class has been certified, then the offer does not moot the claim;

(2) If class certification had been denied, then mooting the putative class representative’s claim does not necessarily moot the class action because he still has an interest in obtaining a final decision on certification; and

(3) If certification has not yet been addressed, then mooting the putative class representative’s claims does not necessarily moot the class action because it could be “so transitory a claim that the court may not have enough time to rule before the representative’s interest expires.”

In other words, the employer is, for all intents and purposes, totally out of luck. Despite having tendered an offer of judgment in an amount more than ten times the amount the employee alleged he was owed, it is going to be stuck in litigation of a collective action. There is, in other words, no way to remedy the employee’s harm and resolve the case.

Pitts v. Terrible Herbst, Inc., No. 10-15965 (9th Cir. Aug. 9, 2011).

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