The Fourth Circuit issued a useful decision, reversing the district court (in North Carolina), which had held that an offer of judgment in a FLSA wage/hour collective action case was a complete settlement of all the claims, so that the case had to be dismissed.
In contrast, the Fourth Circuit held that the offer of judgment lacked key terms or had improper provisions, since it (1) required the plaintiffs to respond within 5 days instead of 10 days; (2) required the plaintiffs to submit signed affidavits as to how much each was claiming, thereby making it a conditional offer of judgment; (3) required the plaintiffs to consent to entry of a dismissal, instead of entry of a judgment against the employer (as a judgment is enforceable in ways that a settlement is not); and (4) required that the settlement amount be kept confidential, but Rule 68 precludes confidential settlements.
Hence, the Fourth Circuit remanded to the district court to allow the plaintiffs to pursue their FLSA claims (or, perhaps, the employer will come up with an offer of judgment that complies with the requirements).
The decision is a useful reminder of the need to ensure that a Rule 68 offer of judgment does, in fact, include all components necessary to resolve a case in order for it to be enforceable, and to decide whether to accept such an offer.
Some excerpts follow:
Simmons, et al. v. United Mortgage & Loan Investment, LLC, et al., No. 09-2147 (4th Cir. Jan. 21, 2011).
http://pacer.ca4.uscourts.gov/opinion.pdf/092147.P.pdf
Argued: October 27, 2010
Decided: January 21, 2011
Before MOTZ and KEENAN, Circuit Judges, and HAMILTON, Senior Circuit Judge.
Affirmed in part; vacated and remanded in part by published opinion. Senior Judge Hamilton wrote the opinion, in which Judge Motz and Judge Keenan joined.
HAMILTON, Senior Circuit Judge:
The primary question presented in this appeal is whether the district court erred in holding that the contents of a particular letter from defense counsel to counsel for the plaintiffs, as clarified by a follow-up letter from defense counsel thirteen days later, rendered moot the plaintiffs’ claims for unpaid overtime wages in a collective action under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-219, such that a live case or controversy no longer existed with respect to such claims, requiring their dismissal for lack of subject matter jurisdiction. We answer this question in the affirmative, and therefore, vacate the district court’s dismissal of the plaintiffs’ FLSA claims and remand for further proceedings consistent with this opinion. . . .
. . . . Of significant relevance to the issues on appeal, counsel for the Defendants sent (via electronic mail, United States mail, and facsimile) a letter dated May 16, 2008, to counsel for the Named Plaintiffs. In the first sentence, counsel for the Defendants stated that he was "writ[ing] for the purpose of resolving this case for all parties." (J.A. 158). In the second sentence, he reported that his clients had authorized him, "without admitting legal liability or fault, to offer each opt-in plaintiff full relief in this case." Id. No specific mention was made regarding the Named Plaintiffs or an offer of judgment.
The balance of the letter stated as follows:
Each opt-in plaintiff will be compensated fully upon receipt of an affidavit stating the dates on which overtime was worked, the total hours they worked each week of their employment up to the date of their termination, the total amount of back pay they claim is owed to them, and a statement explaining how the calculation of overtime amounts claimed was done. My clients will also pay taxable costs and reasonable attorney’s fees supported by time records properly describing the work done and the hours reasonably worked which can be either agreed upon by the parties or submitted to the Court for resolution.
This offer requires that the parties enter a settlement agreement specifying that all claims will be waived and released, this action will be dismissed with prejudice, the settlement will be kept confidential and there will be no admission of liability or disclosure of the settlement terms. I will provide you with the information my client has that is necessary to prepare the affidavits.
This offer of full relief moots this case since there no longer remains any active case or controversy between the parties. This offer remains open for five days after receipt on May 23, 2008. Thereafter, if this offer is not accepted, I will file a motion to dismiss the case as moot.
In a letter dated May 29, 2008, responding to a May 23, 2008 letter by counsel for the Plaintiffs, counsel for the Defendants stated that the offer of settlement in the May 16, 2008 letter included liquidated damages and pertained to the Named Plaintiffs as well as all of the Opt-in Plaintiffs. Also on May 29, 2008, pursuant to Federal Rule of Civil Procedure 12(b)(1), Defendants moved to dismiss the entire case for lack of subject matter jurisdiction. According to the Defendants, the district court no longer possessed subject matter jurisdiction, because they "ha[d] offered to satisfy Plaintiffs’ claims in their entirety," leaving no "live case or controversy requiring litigation." (J.A. 123). . . .
. . . . On September 14, 2009, the district court granted Defendants’ motion to dismiss the Plaintiffs’ FLSA claims for lack of subject matter jurisdiction. In this regard, the district court determined that "Defendants[’] offer of judgment to all Plaintiffs and would-be opt-in Plaintiffs was for full relief, including attorney’s fees and taxable costs," (J.A. 225-26), and that "[c]oncern over the Defendants’ ability to ‘pick-off’ Plaintiffs has been allayed by the blanket nature of the offer of judgment. Both the actual Plaintiffs and would-be Plaintiffs have been offered relief in whole." (J.A. 226). . . .
. . . . Even when considering the clarifications made by the May 29, 2008 letter to the effect that the Defendants’ May 16, 2008 offer included liquidated damages under the FLSA and pertained to the Named Plaintiffs as well as the Opt-in Plaintiffs, we agree with the Plaintiffs that the May 16, 2008 letter did not constitute a Rule 68 offer of judgment. First, the May 16, 2008 letter provided for a five day window to accept the Defendants’ offer rather than a ten day window as provided by the applicable version of Rule 68. Second, rather than making an unconditional offer of judgment on specified terms, the letter conditioned the offer upon the Plaintiffs submitting affidavits stating "the dates on which overtime was worked, the total hours they worked each week of their employment up to the date of their termination, the total amount of back pay they claim is owed to them, and a statement explaining how the calculation of overtime amounts claimed was done." (J.A. 201). Third, rather than offer to have judgment entered against them as the district court found, the plain language of the letter offered only that the Defendants would "enter a settlement agreement specifying that all claims will be waived and released . . . ." Id. The district court’s finding that the May 16, 2008 letter offered for judgment to be entered against the Defendants was clearly erroneous. Fourth, in contrast to the public nature of an unsealed judgment entered pursuant to Rule 68, the May 16, 2008 letter required the Plaintiffs to keep the fact of settlement and the terms of the settlement confidential. See McCauley v. Trans Union, 402 F.3d 340, 342 (2d Cir. 2005) (plaintiff is not obligated to accept a Rule 68 offer of judgment conditioned on settlement being kept confidential and judgment under seal; party engaged in litigation is not entitled to confidentiality); 12 Charles Alan Wright, Arthur R. Miller, & Richard L. Marcus, Federal Practice and Procedure § 3002 (2d ed. Supp. 2010) (offer of judgment requiring confidential settlement rather than court judgment seeks something not authorized by Rule 68).
While we agree with the Plaintiffs that the May 16, 2008 letter, as clarified by the May 29, 2008 letter, did not constitute a Rule 68 offer of judgment, such agreement does not mean an automatic win for the Plaintiffs. This is because the doctrine of mootness is constitutional in nature, and therefore, not constrained by the formalities of Rule 68. Nonetheless, for several reasons, we hold the Defendants’ settlement offer, as set forth in the May 16, 2008 letter and as clarified by the May 29, 2008 letter, did not render moot the Plaintiffs’ FLSA claims for overtime wages. The first reason is that the offer for "full relief in this case" did not offer for judgment to be entered against the Defendants, but rather only offered for the parties to enter into a settlement agreement. Had the Plaintiffs been allowed to litigate fully their FLSA claims and had they fully prevailed on such claims, the district court would have entered a judgment against the Defendants for full relief with respect to those claims. From the view of the Plaintiffs, a judgment in their favor is far preferable to a contractual promise by the Defendants in a settlement agreement to pay the same amount. This is because district courts have inherent power to compel defendants to satisfy judgments entered against them, Spallone v. U.S., 493 U.S. 265, 276 (1990); Grissom v. The Mills Corp., 549 F.3d 313, 319 (4th Cir. 2008), but lack the power to enforce the terms of a settlement agreement absent jurisdiction over a breach of contract action for failure to comply with the settlement agreement. As ably explained in the well respected treatise Federal Practice and Procedure:
Settlements often do not involve the entry of a judgment against the defendant, as compared to a judgment of dismissal, so that from the plaintiff’s perspective the willingness of the defendant to allow judgment to be entered has substantial importance since judgments are enforceable under the power of the court. Indeed, should a settlement not embodied in a judgment come unraveled, the court may be without jurisdiction to proceed in the case, which often becomes a breach of contract action for failure to comply with the settlement agreement. Even if the court retains jurisdiction, plaintiff is left to litigate a breach of contract action or, perhaps, to continue litigating the claims sought to be settled.
12 Charles Alan Wright, Arthur R. Miller, & Richard L. Marcus, Federal Practice and Procedure § 3002, p. 90 (2d ed. 1997) (footnote omitted).
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