Nash v. CVS Caremark Corporation et al

Filing 44

OPINION AND ORDER adopting 31 Report and Recommendations; denying 12 Motion to Dismiss. So Ordered by Judge William E. Smith on 2/9/10. (Jackson, Ryan)

UNITED STATES DISTRICT COURT DISTRICT OF RHODE ISLAND ___________________________________ WILLIAM NASH, individually and on behalf of all other persons similarly situated, ) ) ) ) ) Plaintiff, ) ) v. ) ) CVS CAREMARK CORP. and HOLIDAY ) CVS, LLC, ) ) Defendants. ) ___________________________________)

C.A. No. 09-079 S

OPINION AND ORDER WILLIAM E. SMITH, United States District Judge. Plaintiff pleads this lawsuit for overtime benefits as a "collective action" under the Fair Labor Standards Act ("FLSA"). He purports to act on behalf of himself and "other employees similarly situated" pursuant to 29 U.S.C. § 216(b). supposedly "similarly situated" party opted in to After one the case,

Defendants presented both that person and Plaintiff with offers of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. The opt-in party accepted the offer and is no longer

part of the case; Plaintiff rejected the offer, but does not dispute that it was adequate to cover his damages. Defendants

moved to dismiss the suit on grounds that the Rule 68 offer mooted Plaintiff's claim. However, since that time, other

parties

have

opted

into

this

action

and

wish

to

have

their

claims resolved as part of a "collective action" with Plaintiff. On November 13, 2009, Magistrate Judge Lincoln D. Almond issued a Report and Recommendation ("R&R") concluding that the case was not moot and should not be dismissed. No. 31, Nov. 13, 2009.) to Presently the R&R. before The (See R&R, Doc. the Court is

Defendants'

objection

relevant

facts, For

procedural background and analysis are contained the R&R.

the reasons outlined below (in addition to those articulated by Judge Almond), the Court denies Defendants' objection and adopts the R&R in full. I. Rule 68 Nothing in the text of Rule 68 compels dismissal of a case for lack of subject matter jurisdiction when a plaintiff rejects an adequate offer of judgment. Rather, the Rule creates what

amounts to a penalty scheme when a plaintiff moves forward with litigation despite being offered the maximum damages she can hope to obtain at trial. "If the judgment that the offeree

finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made." Fed. R. Civ. P. 68(d). Of course, as a practical

matter, in some circumstances a Rule 68 offer may "eliminate[] a legal dispute upon which federal jurisdiction can be based," because "[y]ou cannot persist 2 in suing after you've won."

Greisz v. Household Bank (Illinois), N.A., 176 F.3d 1012, 1015 (7th Cir. 1999). But this does not transform Rule 68 into an Rather, as this case makes

escape hatch from every lawsuit.

clear, whether a controversy becomes moot following a Rule 68 offer depends on the factual circumstances, the cause of action, and the procedural status of the claims at issue. Moreover,

nothing in Rule 68 itself suggests that it should be used as a vehicle for sabotaging claim-aggregating devices like 29 U.S.C. § 216(b) and Rule 23. See Fed. R. Civ. P. 1. (explaining that

the Federal Rules of Civil Procedure should be "construed and administered to secure the just, speedy, and inexpensive

determination of every action and proceeding"). II. The holding of Cruz v. Farquharson does not control this case The Court agrees with Judge Almond that Cruz v.

Farquharson, 252 F.3d 530, 533 (1st Cir. 2001), in which the First Circuit approved the dismissal of a Rule 23 action as moot, is distinguishable. Cruz emphasized that between the date

the plaintiffs in that case received "complete relief," and the date the district court dismissed the case as moot, "no new plaintiffs tried to intervene, and the named plaintiffs made no effort to amend their complaint to add new parties." F.3d at 533. have, in fact, That is not so here. "tried to intervene" Cruz, 252

Four additional parties as "similarly situated"

3

plaintiffs by submitting their consents for the Plaintiff to pursue claims on their behalf. As Judge Almond noted, where even one similarly-situated plaintiff opts in to an FLSA suit after the rejection of a Rule 68 offer, courts "have refused to permit defendants to moot putative FLSA collective actions." Sys., No. 06 CV 0128 (RJD)(JMA), Yeboah v. Central Parking 2007 WL 3232509, at *3

(E.D.N.Y. Nov. 1, 2007); see Reyes v. Carnival Corp., No. 0421861-CIV., 2005 WL 4891058, at *2 (S.D. Fla. May 25, 2005) (refusing to dismiss FLSA action where "other plaintiffs . . . opted in to [the] suit [after] the offer of judgment was made"); Roble v. Celestica Corp., 627 F. Supp. 2d 1008, 1013-14 (D. Minn. 2007) (finding that identifying opt-ins sustained

jurisdiction); Rubery v. Buth-Na-Bodhaige, Inc., 494 F. Supp. 2d 178, 179-80 (W.D.N.Y. 2007) (denying motion to dismiss where more than fifty people had filed consents to join FLSA action). This is true even if, as here, there is no dispute about the adequacy of the offer. See Yeboah, 2007 WL 3232509, at *5

(explaining that even if the plaintiff could not dispute the sufficiency of the judgment, "it neither mooted plaintiff's FLSA claim nor deprived [the court] of subject matter jurisdiction," because of the "presence of opt-ins.")1

Of course, a lowball Rule 68 offer cannot moot a case. Defendants attempt to distinguish Yeboah on this basis; there,
1

4

Defendants contend that the opt-ins cannot be considered "plaintiffs" or "parties" to the suit for purposes of any

exception to mootness carved out by Cruz. 533.

See Cruz, 252 F.3d at

Cruz stressed that there had been no "decision on class under Rule 23, appearing to require a formal

certification"

grant of class status in order to preserve a controversy after named parties obtain full relief. reached the equivalent stage in Here, the case has not yet the § 216(b) context:

"preliminary collective action certification," which requires an initial demonstration that the plaintiff "is `similarly Poreda

situated' to the other members of the proposed class."

v. Boise Cascade, L.L.C., 532 F. Supp. 2d 234, 238 (D. Mass. 2008). In the absence of preliminary certification, Defendants

argue, Plaintiff has no procedural right to act on behalf of purported "similarly situated" parties. "[A] § 216(b) plaintiff

. . . presents only a claim on the merits. . . . [and] [i]n contrast to the Rule 23 plaintiff, a § 216(b) plaintiff has no claim that he is entitled to represent other plaintiffs."

Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1249 (11th Cir. 2003).

the plaintiff did contest whether the offer provided full relief. Nevertheless, as the language quoted in the parenthetical statement above demonstrates, the alleged inadequacy of the offer was not necessary to the holding in Yeboah. 5

In other words, Defendants insist, without the only safe harbor arguably warranted by Cruz -- collective action status -- this lawsuit died the moment that Plaintiff rejected his Rule 68 offer. At that time, there were no other opt-ins with live

claims, and plaintiff had no right to stand in for anyone else. Later opt-ins could not resurrect the action once it expired. This logic has some superficial appeal. But its limitation

is that, if true, employers could always "use Rule 68 as a sword . . . and avoid[] ever having to face a collective action." Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 919 (5th Cir. 2008). Congress clearly did not intend such an "anomaly" in See id. Neither does Cruz, which concerns

enacting § 216(b).

Rule 23, require the result Defendants urge here, which would effectively lawsuits thwart Congress' preference to "avoid FLSA multiple

where

numerous

employees"

allege

violations.

Prickett v. DeKalb County, 349 F.3d 1294, 1297 (11th Cir. 2003). The Court recognizes that Cruz may create some tension with the underlying rationale for decisions allowing § 216(b) opt-ins to preserve jurisdiction. As explained by the Fifth Circuit in

Sandoz, at bottom those cases rest on what is known as the "relation back" doctrine. See Sandoz, 553 F.3d at 921; see,

e.g., Yeboah, 2007 WL 3232509, at *3 (citing Weiss v. Regal Collections, 385 F.3d 337, (3d Cir. 2004), a Rule 23 case

dealing with the "relation back" doctrine). 6

Sandoz acknowledged

the quandary raised by Cameron-Grant: a named FLSA plaintiff "cannot represent any other employees until they affirmatively opt in to the collective action." Sandoz, 553 F.3d at 919 "If our analysis plaintiff's] case

(citing Cameron-Grant, 347 F.3d at 1249.). stopped there," the court reasoned, "[the

would be moot," because she had received an adequate offer of judgment before any opt-ins joined the case. Id. Nevertheless,

the court cited Sosna v. Iowa, 419 U.S. 393 (1975), as providing a solution. There, the Supreme Court observed that a Rule 23

controversy might become moot "before the district court can reasonably be expected to rule on a certification motion." at 402 n.11. class filing Id.

Depending on the circumstances, in such instances might "be said to `relate preserve back' to the

certification of the

complaint,"

which

would

jurisdiction.

Id. at 402 n.11.

Sandoz found that the "relation back" doctrine

was just as appropriate for § 216(b) as Rule 23, because both types of actions were vulnerable to strategic mooting by

Defendants. plaintiff to

Accordingly, "there must be some time for a[n FLSA] move to certify a collective action before a

defendant can moot the claim through an offer of judgment." Sandoz, 553 F.3d at 921. Defendants fairly point out that Cruz did not approve of such an approach to Rule 23, and in fact took a narrow view of Sosna. The holding in Sosna 7 was that jurisdiction did not

disappear

when

a

named

plaintiff's

claim

became

moot

after

certification of a class with live controversies. U.S. at 402. was not

Sosna, 419

Cruz stated outright that the "holding in Sosna" because the plaintiffs in Cruz had not

applicable,

obtained class certification.

Cruz, 252 F.3d at 534.

At the

same time, Cruz did not address the footnote in Sosna explaining the "relation back" idea. Furthermore, no First Circuit

decision has considered the question of whether it would be proper to use the "relation back" approach in the context of § 216(b).2 In the Court's view, applying the "relation back" doctrine is appropriate in this case. Plaintiff represents he has not

yet moved for preliminary certification because he has been busy opposing Defendants' efforts to transfer venue and dismiss the case, which they commenced less than a month after the Complaint was filed.
2

Under the "relation back" doctrine, the opt-ins who

To be fair, it does appear that the First Circuit takes a The cases narrower view of the doctrine than Sandoz does. implicitly frame it as a subset of the "capable of repetition, yet evading review" exception to mootness. In Gerstein v. Pugh, 420 U.S. 103 (1975), the Supreme Court cited Sosna's "relate back" footnote in justifying jurisdiction when the nature of the alleged injury was transient -- assuring the mootness of named plaintiffs' claims prior to resolution -- but a class of live claims was certain to persist. See Gerstein, 420 U.S. at 110 n.11. In, Cicchetti v. Lucey, 514 F.2d 362, 367 (1st Cir. 1975), the First Circuit cited Gerstein as the typical example of when "relation back" is appropriate. Cruz simply stated that the case before it was unlike Gerstein (although, again, without mentioning the "relate back" mechanism specifically). See Cruz, 252 F.3d at 535. 8

appeared

after

Plaintiff

rejected

the

Rule

68

offer

sustain

jurisdiction; this will give Plaintiff the opportunity to seek provisional certification without "undue delay" after the entry of this Order. at 348). Sandoz, 553 F.3d at 921 (quoting Weiss, 385 F.3d

This, in turn, will enable "due deliberation" on the

issue of whether Plaintiff is the appropriate representative of a collective action. See Weiss, 385 F.3d at 348.

III. Policy considerations As discussed, and as Judge Almond noted, granting dismissal in these circumstances would impair the Congressional preference for collective actions embodied in 216(b). some additional comments on this topic below. The Court offers But there is also

a second policy consideration that favors affirming the R&R. Specifically, the present motion underscores the unique danger of tactical manipulation in FLSA cases. Thus, as explained

below, to the extent Cruz could be read to establish a broad mootness regime that reaches beyond the Rule 23 context, an exception for FLSA actions is warranted. To begin with, it is clear that allowing Defendants to "pick off" named FLSA plaintiffs one-by-one encourages See

manipulation of cases and ultimately of the federal courts. Sandoz, 553 F.3d at 919.

One court in Illinois described the

ways employers can hamstring collective actions if allowed to snuff named plaintiffs' claims using Rule 68: 9

[The] defense strategy creates a virtually unwinnable situation for plaintiffs in collective or class action lawsuits. Defendant makes an offer of "judgment" to Plaintiff, then alleges that the action is moot. Plaintiff therefore must either pursue discovery very early in the case, when a court likely will deem it premature, or seek class certification and/or notice before discovery, which runs the risk of harming the interest of those as-yet undiscovered class members. Reed v. TJX Cos., NO. 04 C 1247, 2004 WL 2415055, at *3 (N.D. Ill. Oct. 27, 2004). The FLSA enforcement scheme clearly does Section 216(b) does not require provisional certification of a

not envision such a minefield. plaintiffs to petition for

"collective action" when filing a complaint.

In fact, the final

ruling on whether the named plaintiff may maintain a "collective action" usually occurs "after discovery is complete." 532 F. Supp. 2d at 239. Poreda,

The collective action process "should

be able to `play out' according to the directives" of § 216(b) and the cases applying it, to permit "due deliberation by the parties and the court" on collective action certification. Weiss, 385 F.3d at 347-48 (discussing the Rule 23 process). The moot-and-dismiss tactic also facilitates forum-shopping and plaintiff-shopping. At oral argument, Defendants confirmed See

that multiple lawsuits regarding the overtime claims asserted here are pending in different jurisdictions around the country. Permitting use of Rule 68 to moot cases in one or more forums and thereby cherry-pick another, potentially with the weakest collective action representative, 10 upends the longstanding

principle that, in cases based on federal-question jurisdiction, the plaintiff is the "master of the claim." v. Williams, 482 U.S. 386, 392 (1987). Defendants might object that Rule 23 actions present the same worries. 216(b): the After all, Rule 23 advances a policy similar to § efficient resolution of widespread small claims Caterpillar, Inc.

dependent on common legal and factual questions.

Arguably, the

opt-out structure of Rule 23 embodies an even firmer commitment to aggregating claims, in contrast to the opt-in rule for § 216(b) cases. And if this is true, how can the cited policies

provide any basis to distinguish Cruz, where the same concerns were not enough to stave off dismissal of a Rule 23 action? In

that case, the plaintiffs alleged, there was a large pool of class members, and the defendant had defused class action See

litigation by mooting the claims of the named parties. Cruz, 252 F.3d at 535.

The answer to the question above is that FLSA actions are more vulnerable to manipulation than Rule 23 actions. For the

latter, filing a complaint tolls the statute of limitations for all alleged class members, whether they know of the lawsuit or not. (1983) See Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350 ("The filing of a class action tolls the statute of

limitations as to all asserted members of the class . . . ."). In contrast, parties alleged to be "similarly situated" in a § 11

216(b) case must affirmatively opt in to toll the limitations period. See 29 U.S.C. § 256 (explaining that an FLSA action is

not considered to be commenced for a similarly situated party until he submits written consent to join the case); Bonilla v. Las Vegas Cigar Co., 61 F. Supp. 2d 1129, 1136-37 (D. Nev. 1999) ("[A]ll potential plaintiffs to § 216(b) actions must file their consent to the suit to toll the statute of limitations.")

(emphasis in original). This means that defendants can bleed value out of a large pool of outstanding FLSA claims in a way they cannot with a comparable group of Rule 23 claims. "Picking off" § 216(b)

plaintiffs delays the point at which any collective action can be provisionally certified. situated" This stalls notification v. to

potential

"similarly

parties.

O'Donnell

Robert

Half Int'l, Inc., 534 F. Supp. 2d 173, 177 (D. Mass. 2008) ("A class may be conditionally certified and notified of the

pendency of an action only if the putative class members are "similarly situated" with the named plaintiffs.") The longer it

takes for an FLSA class to mature, the lower members' damages will be once they opt in, given the two-year limitations period. See 29 U.S.C. § 255 (2010). In a parallel situation under Rule

23, the clock for absentees stops upon the filing of a complaint that raises their claims. Thus, even if employers pick off some

12

named plaintiffs, the limitations period for absentees pauses while any applicable class action is pending. The predicament of the opt-ins in this case brings the problem into sharper focus. Widespread claims involving common

issues invite lawsuits in different jurisdictions, as is the situation here. Note the disparate outcomes this creates for As a practical matter, if a

Rule 23 absentees and FLSA opt-ins.

Rule 23 action is dismissed, class members may not have to worry about expiration dates for their claims drawing closer. If

there is another class action underway that allegedly embraces their claims, the automatic tolling rule from Crown, Cork & Seal shelters them. protection. sinks -- the Opt-ins to collective actions enjoy no such

If the suit to which they have hitched their claims result Defendants seek here -- the clock starts

running again, even if they might be "similarly situated" to the named plaintiff in another pending case. observed: [I]f [Defendants were] successful in dismissing the case as mooted, the four plaintiffs who opted in . . . would arguably have to either initiate new individual FLSA actions or join another applicable collective action. Thus, the tolling of the limitations period for their claims could be delayed and, if they were ultimately successful, their back pay damages could be reduced since the value of their claims is potentially diminished with each passing day. Thus, as Judge Almond

13

(R&R at 4-5.)

The point is that FLSA opt-ins are more exposed

to the erosion and possible expiration of their claims than Rule 23 absentees. Simply put, it is easier to drown collective actions than class actions. If allowed to use Rule 68 as a weapon,

defendants can torpedo complaint after complaint, leaving optins to swim for the nearest viable action as their claims leak value. This justifies a more relaxed mootness standard in FLSA

cases than Rule 23 cases, and therefore provides an additional basis for distinguishing Cruz. IV. Conclusion For the reasons stated in the R&R, and each of those set forth above, the Court adopts the R&R in full. motion to dismiss is therefore DENIED. IT IS SO ORDERED. Defendants'

/s/ William E. Smith
William E. Smith United States District Judge Date: February 9, 2010

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