Ward v. Bank of New York Class Action Defense Case: Offer Of Judgment Rendered Moot Plaintiff’s Fair Labor Standards Act (FLSA) Collective Action Claim New York Federal Court Holds

Jan 10, 2007 | By: Michael J. Hassen

New York Federal Court Agrees with Defense that FRCP Rule 68 Offer of Judgment Required Dismissal of Plaintiff’s FLSA (Fair Labor Standards Act) Claim and Court Refuses to Exercise Supplemental Jurisdiction Over State Labor Law Class Action Claims

A former hourly employee, Ward, filed a putative class action against her former employer, Bank of New York, alleging violations of the federal Fair Labor Standards Act (FLSA) (as a collective action) and New York labor laws (as a class action) for failure to pay overtime. Ward v. Bank of New York, 455 F.Supp.2d 262, 264 (S.D.N.Y. 2006). An amended complaint named a former assistant manager, Smalls, who alleged additionally that the Bank improperly classified her and others as exempt employees. Id., at 265. The defense made an offer of judgment to Ward for $1000 under FRCP Rule 68, which she rejected. Id. Defense attorneys then moved to dismiss Ward’s claims because the Rule 68 offer rendered her action moot and because no other ” plaintiffs had opted in to the FLSA collective action. Id. The federal court granted the defense motion Ward’s FLSA claim and dismissed her state law class action claims because it refused to exercise jurisdiction over them.

Defense attorneys argued that “Ward’s FLSA claims should be dismissed on the ground that [the Bank’s] Rule 68 offer of judgment moots those claims, and therefore the Court lacks subject matter jurisdiction.” Ward, at 265. The district court agreed. The court held that “[w]hen a defendant offers the maximum recovery available to a plaintiff, the Second Circuit has held that the case is moot and ‘there is no justification for taking the time of the court and the defendant in the pursuit of miniscule individual claims which defendant has more than satisfied.’” Id., at 267 (citations omitted). The same rule applies in FLSA collective actions: unless other plaintiffs opt in to the collective action, the plaintiff “advances only her own individual claims,” which the Rule 68 offer rendered moot Id. The federal court held at page 267 that this was true “even where plaintiff rejects the offer of judgment” (citations omitted). Moreover, “Rule 68 also applies in class actions, where prior to class certification defendant offers plaintiff the maximum amount that plaintiff could recover at trial.” Id., at 268 (citations omitted).

Plaintiff could identify only two weeks when she worked more than 40 hours without receiving overtime pay. Ward, at 269. Ward failed to establish that the $1000 offer did not “fully satisfy her claim,” id., at 268; on the contrary, it represented “many times the amount due Ward under the FLSA, and consequently more than she could recover at trial,” id., at 269. Accordingly, her FLSA claim was moot. That having been decided, the federal court refused to exercise supplemental jurisdiction over her New York state law claims, and therefore granted the defense motion to dismiss Ward’s claims. Id., at 270.

NOTE: The district court recognized that “courts are wary of attempts by defendants to evade FLSA collective actions by making Rule 68 offers of judgment ‘at the earliest possible time,’” Ward, at 268, but plaintiff could identify only two weeks when she worked more than 40 hours without receiving overtime pay, id., at 269. It was concerned about the possible abuse of Rule 68 offers in FLSA collective actions, but found the policy arguments advanced by Ward “not compelling” under the particular facts of the case. Id., at 269-70.

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