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Morales-Arcadio v. Shannon Produce Class Action Defense Case: Defense Rule 68 Offer Of Judgment Served Prior To Opt-In Deadline For Class Action Under Fair Labor Standards Act (FLSA) Is Invalid Georgia Federal Court Holds

Georgia Federal District Court Holds that Offers of Judgment in FLSA (Fair Labor Standards Act) Class Action Cannot be made Prior to Expiration of Opt-In Period Because Rule 68 Requires that Offer be made on Adverse Parties and Class Members are not “Fully Identifiable” Until Opt-In Period Ends

Plaintiffs filed a putative class action on behalf of migrant farm workers against Shannon Produce Farms in July 2005 alleging violations of the Fair Labor Standards Act (FLSA), and in November 2005 they filed a motion for certification of a FLSA collective action pursuant to 29 U.S.C. § 216(b), which the district court granted. Morales-Arcadio v. Shannon Produce Farms, 237 F.R.D 700, 701 (S.D. Ga. 2006). Prior to the “opt-in” deadline for class members to join the class action, defense attorneys served an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. Id. Plaintiffs’ lawyer moved to invalidate the offer of judgment. The district court summarized the competing arguments at page 701 as follows:

Plaintiffs contend that defendants’ offer of judgment is improper since defendants served it during the time period provided by the Court for other similarly-situated plaintiffs to join the instant FLSA collective action. . . . Plaintiffs argue, inter alia, that the offer short-circuits the collective action process, has no legal effect since it purports to extend to workers who are not parties to the action, and moots the certified collective action and court-authorized notice. . . . Defendants have filed an opposition to the motion contending that plaintiffs’ motion is premature since a motion to strike an offer of judgment is only proper at the conclusion of a case. . . . Defendants also contend that their offer of judgment is proper since it specifically contemplates and provides a recovery for additional opt-in plaintiffs who join the action by the opt-in deadline. . . . (Footnote omitted)

The federal court granted plaintiffs’ motion. The court explained that it set a June 15, 2006, deadline for opting in to the class action, but defense attorneys served an offer of judgment on March 6, 2006, which would have required a response by March 23. Morales-Arcadio, at 701. The district court held that Rule 68 requires that the offer of judgment be served “upon the adverse party,” but that potential class members are not parties to the class action unless and until they opt in. Id., at 701-02. Accordingly, “the class of plaintiffs was not fully identified at the time of the offer,” id., at 702. This meant that the offer of judgment applied only “to the original named plaintiffs and to those individuals who had joined the collective action as of March 6, 2006,” and was “invalid as to the potential class members who had not opted into the litigation when defendants made their offer, since those individuals were not ‘parties’ to the collective action.” Id. The district court therefore granted the motion to invalidate the offer of judgment.

NOTE: The district court noted that “since a claim generally becomes moot when a defendant fully satisfies a plaintiff’s claim for relief with an offer of judgment, courts have been concerned about defendants strategically making offers in an attempt to cut off litigation before all of the class members have been identified.” Morales-Arcadio, at 702 n.2 (citations omitted).

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