Counsel Correspondence Not Rule 68 Offer of Judgment

In this FLSA overtime-pay case filed by employees of a mortgage loan company, correspondence from employer’s defense attorney to plaintiffs’ counsel, offering to settle the individual plaintiffs’ claims in full, did not moot the plaintiffs’ claims for overtime pay, and the 4th Circuit reverses the contrary holding of the district court.

The primary question presented in this appeal is whether the district court erred in holding that the contents of a particular letter from defense counsel to counsel for the plaintiffs, as clarified by a follow-up letter from defense counsel 13 days later, rendered moot the plaintiffs’ claims for unpaid overtime wages in a collective action under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-219, such that a live case or controversy no longer existed with respect to such claims, requiring their dismissal for lack of subject matter jurisdiction.

The district court granted defendants’ motion to dismiss plaintiffs’ FLSA claims for lack
of subject matter jurisdiction. In this regard, the district court determined that defendants’ offer of judgment to all plaintiffs and would-be opt-in plaintiffs was for full relief, including attorney’s fees and taxable costs, and that concern over defendants’ ability to “pick-off” plaintiffs has been allayed by the blanket nature of the offer of judgment.

Both the actual plaintiffs and would-be plaintiffs had been offered relief in whole, according to the district court. The district court also denied plaintiffs’ motion for conditional certification of the FLSA collective action and for court-facilitated notice to potential collective action members on the ground that plaintiffs’ FLSA claims were moot prior to plaintiffs filing such motion, and therefore, it no longer possessed subject matter jurisdiction to certify the collective action. Apparently relying upon the same reasoning, the district court also refused to allow the motion to be amended.

On appeal, plaintiffs challenge the Rule 12(b)(1) dismissal of their FLSA claims and the Rule 12(b)(6) dismissal of their comparable state law claims.

From plaintiffs’ point of view, a judgment in their favor is far preferable to a contractual promise in a settlement agreement to pay the same amount, because district courts have inherent power to compel defendants to satisfy judgments, but lack power to enforce the terms of a settlement agreement absent jurisdiction over a breach of contract action for failure to comply with the settlement agreement.

In sum, the fact that defendants’ offer to settle plaintiffs’ FLSA claims did not offer for judgment to be entered against defendants, was ambiguous as to the amounts of actual and liquidated damages to be recovered, and was conditioned upon an agreement by plaintiffs to keep the settlement confidential, prevented the mooting of plaintiffs’ FLSA claims. We hold the district court erred by dismissing plaintiffs’ FLSA claims for lack of subject matter jurisdiction, vacate the district court’s order dismissing such claims and corresponding judgment, and remand such portion of this action for further proceedings consistent with this opinion.

Further, we hold the district court did not err in dismissing plaintiffs’ claims under the North Carolina Wage and Hour Act.

We vacate the order dismissing the FLSA claims and corresponding judgment and remand that portion of the case for further proceedings; vacate the district court order denying plaintiffs’ motion for conditional collective action certification of their FLSA claims and their amended version of such motion and remand for further proceedings. We affirm dismissal of the NCWHA claims and vacate the district court order denying plaintiffs leave to file their proposed second amended complaint.

Simmons v. United Mortgage & Loan Investment LLC (Hamilton, J.) No. 09-2147, Jan. 21, 2011; USDC at Charlotte, N.C. (Mullen) Narendra K. Ghosh fro appellants; Kevin V. Parsons for appellee. VLW 011-2-016, 24 pp.