In the FLSA lawsuit, the plaintiff employee alleged that she
and other similarly situated employees were not paid in accordance with the
FLSA because her hospital employer automatically deducted 30 minutes each day
from their paycheck for lunch whether they worked through lunch or not. Genesis
Healthcare Corp. v. Symczyk, No. 11-1059 (4-16-13). No other employees joined her lawsuit. Upon filing its answer to her complaint, her
savvy employer made an offer of judgment under Civil Rule 68 – i.e., offered
her the full requested relief of $7500 of unpaid wages plus any attorney fees,
costs and expenses that the court might deem appropriate. She was given 10 days to accept the offer,
which she ignored. The trial court, however,
was impressed. By offering her full
relief, the employer mooted her individual claim (under the law of the Third
Circuit – which is not universally accepted on this point), which was dismissed. Because no one else had joined her lawsuit,
and she had no personal interest in the pending lawsuit, the case was dismissed. The Third Circuit reversed, objecting to allowing
employers to cherry pick cases by paying off the representative plaintiff. However, the Supreme Court reversed.
While the FLSA authorizes an aggrieved employee to bring an
action on behalf of himself and “other employees similarly situated,” 29 U. S.
C. §216(b), the mere presence of collective-action allegations in the complaint
cannot save the suit from mootness once the individual claim is satisfied.
. . . . .
The Court of Appeals concluded that respondent’s individual
claim became moot following petitioners’ Rule 68 offer of judgment. We have
assumed, without deciding, that this is correct.
Reaching the question on which we granted certiorari, we
conclude that respondent has no personal interest in representing putative,
unnamed claimants, nor any other continuing interest that would preserve her
suit from mootness. Respondent’s suit was, therefore, appropriately dismissed
for lack of subject-matter jurisdiction.
The Court distinguished this case for damages from equitable
cases where the fleeting nature of the underlying claim (such as the lawfulness
of pre-trial detentions) would almost always render a case moot before it could
be heard. Notably, the Court did not
address the larger issue of whether a rejected offer of judgment renders the
case moot, which is an unsettled issue of law.
The lower courts held that it did and the plaintiff did not appeal that
issue to the Supreme Court.
In the second case, an employee was injured in a car
accident and his employer’s health plan paid $66,866 in medical costs. US Airways,
Inc. v. McCutchen, No. 11-1285 (4-16-13). The employee then retained a lawyer to sue
the driver of the car which injured him.
That driver had also killed and/or seriously injured 3 other people, had
limited insurance coverage and settled for $10,000. However, the employee’s own insurance carrier
paid $100,000. Of the $110,000 recovered by the employee, 40% of it went to
his attorney’s contingency fee. Although
he was left with only $66,000, the employer’s health plan then sued him under
§502(a) of ERISA to recover reimbursement of the $66,888 in medical expenses it
paid on his behalf. The terms of the health plan provided:
“If [US Airways] pays benefits for any claim you incur as the
result of negligence, willful misconduct, or other actions of a third party, . . . [y]ou will be required to
reimburse [US Airways] for amounts paid for claims out of any monies recovered
from [the] third party, including, but not limited to, your own insurance
company as the result of judgment, settlement, or otherwise.”
The health plan’s right to reimbursement is an equitable
lien by agreement on the proceeds of the personal injury litigation. Nonetheless, it is a contractual right and is
not subject to common law rules concerning equitable liens. Therefore, the plan’s contractual rights could
not be defeated by the common law doctrines of unjust enrichment, double
recovery, or common fund. However,
because the plan was silent on the allocation of attorney fees, the Court’s majority
(and the point on which the minority dissented because the terms of the plan
were plain and uncontested), concluded that the silence would be filled by the
common law doctrine of the common fund.
The plan did not specify whether its right to recovery went to the first
dollar or only to the dollars recovered (i.e., after deduction for attorney
fees).
The majority found
that the plan’s contractual right to recovery was reduced by the 40% attorney
contingency fee. Otherwise, the plan would receive a full ride
at the employee’s expense. The employee
here would be out of pocket for bringing the lawsuit that the plan failed to
bring or contribute towards. To rule otherwise, would also create a disincentive
for the employee to have brought the personal injury lawsuit in the first
place. Of course, employers could
avoid having to share with personal injury attorneys in the future by revising
the terms of their ERISA plans to explicitly avoid responsibility for those
fees and/or specify how its recovery would be calculated.
NOTICE:
This summary is designed merely to inform and alert you of recent legal
developments. It does not constitute legal advice and does not apply to any
particular situation because different facts could lead to different results.
Information here can change or be amended without notice. Readers should not
act upon this information without legal advice. If you have any questions about
anything you have read, you should consult with or retain an employment
attorney.