Rule 68 Offer Aimed at Picking Off a Lead Class Action Plaintiff Not Effective

Rule 68 Offer Aimed at Picking Off a Lead Class Action Plaintiff Not Effective

On April 12, 2019, the Massachusetts Supreme Judicial Court (“SJC”) issued a ruling that clarified many outstanding questions in class action practice in Massachusetts.  In Gammella v. P.F. Chang’s China Bistro, Inc., 482 Mass. 1 (2019), the SJC provided guidance on: (1) the standard for class certification under the Massachusetts wage and hour laws; (2) the standard for determining whether the numerosity requirement for class certification under rule 23 has been satisfied; and (3) if a Rule 68 offer of judgment tendered only to the named plaintiff in a putative class action can moot the plaintiff’s claim.

In this case, the Plaintiff’s main contention was that the Defendant violated a regulation of the Division of Occupational Safety, issued pursuant to G. L. c. 151, requiring that “[w]hen an employee who is scheduled to work three or more hours reports for duty at the time set by the employer, and that employee is not provided with the expected hours of work, the employee shall be paid for at least three hours on such day at no less than the basic minimum wage.” 454 Code Mass. Regs. § 27.04(1).  Evidence produced in discovery demonstrated that in approximately 7,000 instances involving hundreds of other employees, the defendant did not provide reporting pay when the plaintiff and these employees were scheduled to work a shift of three or more hours but clocked out before they had worked three hours. The Defendants admitted they had no way of knowing the reason why such employees left early.

The lower Court denied Plaintiff’s Motion to Certify Class on the grounds that the class was insufficiently numerous to satisfy the certification requirements of rule 23.  After the motion was denied, the Defendant made two Rule 68 offers of judgment that purported to provide complete relief on Plaintiff’s individual claim. The Plaintiff rejected these offers and the Defendant moved to dismiss the case on the ground that through its rule 68 offer rendered the Plaintiff’s individual claims moot.  The lower Court granted this motion.

After ruling that Rule 23 provided the appropriate standard for class certification in matters brought pursuant to the Massachusetts wage and hour laws, the SJC reversed the rulings of the lower Court.

First, the SJC dealt with the numerosity issue, holding that “[t]he combination of thousands of instances of nonpayment to hundreds of employees, the absence of any record-keeping justifying the nonpayments, and a refusal to provide the names of the employees involved made it reasonable to infer that the number of plaintiffs would satisfy the numerosity requirement.”  The SJC also made it clear that a lower Court should take into consideration whether the dollar amount that each employee could potentially recover was likely to be too small for individual suits to be practicable and that employees bringing such individual suits had reason to fear retaliation.

Next, the SJC dealt with the issue of Rule 68 offers in the context of class action litigation.  The Court held that an “unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case, because ‘with no settlement offer still operative, the parties remain[ed] adverse.’”  Additionally, the Court held that “even where a named plaintiff’s individual claim is rendered moot, class claims may remain live where the plaintiff has yet to appeal from the denial of a motion for class certification.

In concluding, the Court made it clear that the mootness issue is particularly important in cases where another named plaintiff has not been identified.  The Court stated that certification should not be thwarted where the “opposition is based on information in the defendant’s possession that the defendant itself asserted the plaintiff did not need and then used strategically against the plaintiff.”

This decision is a cautionary ruling for employers.  The Court has made it clear that it will not countenance employers that withhold class information, use that class information for their own purposes, and then argue that a Plaintiff must have specific numerical evidence to achieve certification.

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