Commercial Litigation and Arbitration

Mooting Claim by Offer of Judgment That Offers Plaintiff Complete Relief — Procedure under Rule 12(b)(1) Mirrors Summary Judgment Practice under Rule 56 — Plaintiff’s 26(a)(1) Damages Calculation May ≠ Full Post-Discovery Claim

Flores v. ACT Event Servs., Inc., 2015 U.S. Dist. LEXIS 16773 (N.D. Tex. Feb. 11, 2015):

3. Mooting Claims Through Offers of Judgment

a. Examples of Rule 12(b)(1) Motions Following Offers of Judgment

Federal Rule of Civil Procedure 68 provides defendants with one method for eliminating a live case or controversy: "[A] party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued." Fed. R. Civ. P. 68(a). In the Fifth Circuit, if an employer makes an offer of judgment fully satisfying an employee's FLSA claims, then those claims are rendered moot regardless of whether the employee accepts the offer. See Sandoz, 553 F.3d at 914, 919. After issuing an offer of judgment, an employer can present a "factual attack" on jurisdiction by filing a Rule 12(b)(1) motion supported by the offer of judgment and other relevant documents. See Rollins, 2006 U.S. Dist. LEXIS 87432, 2006 WL 3486781, at *1-2. Before a court can declare the claims moot and consequently dismiss them, however, it must determine if the offer [*14]  of judgment fully satisfies the employee's claims.

In Rollins, this court granted the employer's Rule 12(b)(1) motion after the employer made an offer of judgment covering unpaid overtime wages, liquidated damages under Section 216(b), and costs and reasonable attorney's fees. 2006 U.S. Dist. LEXIS 87432, [WL] at *2, *5. The employer submitted time cards to support its calculation of unpaid overtime wages, thus creating a "factual attack" on the court's jurisdiction. 2006 U.S. Dist. LEXIS 87432, [WL] at *2. In response, the employee submitted no evidence disputing the employer's calculations; instead, he merely argued that "he should not be obligated to tender substantial proof of his allegations at this stage of the litigation." 2006 U.S. Dist. LEXIS 87432, [WL] at *3 (internal quotations and brackets omitted). With the employer's evidence unrebutted, the court concluded that the "offer of judgment [made the employee] whole" and therefore eliminated any live case or controversy. 2006 U.S. Dist. LEXIS 87432, [WL] at *5; see also Ward v. Bank of New York, 455 F. Supp. 2d 262, 268-70 (S.D.N.Y. 2006) (concluding that the employer's offer of judgment mooted any FLSA claims because the employee failed to submit any evidence challenging the employer's time sheets).

When facing a "factual attack," the majority of employees have not followed this ill-advised approach. In Reed v. TJX Companies, Inc., No. 04 C 1247, 2004 U.S. Dist. LEXIS 21605, 2004 WL 2415055, at *1 (N.D. Ill. Oct. 27, 2004), the court denied the employer's Rule 12(b)(1) motion after the employee contested the [*15]  sufficiency of the offer of judgment. The employee highlighted that the employer did "not clarify how [it] identified that a particular time report had been edited nor how [it] determined that other time reports had not been edited," issues pertinent to the calculation of outstanding wages. Id. Furthermore, in only analyzing edits to the time sheets, the employer failed to address the employee's claim that "he was asked to clock in and out for a lunch break while he continued, in actuality, to work." Id.

In Reyes v. Carnival Corporation, No. 04-21861-CIV, 2005 U.S. Dist. LEXIS 11948, 2005 WL 4891058, at *2-3 (S.D. Fla. May 25, 2005), the employer made an offer of judgment exceeding the employee's own preliminary damages computation; nevertheless, the court rejected the employer's "factual attack." To support its conclusion, the court noted that "the plaintiff in this case disputes that [the employer's] offer is for more than the maximum amount of damages he could recover under the FLSA." 2005 U.S. Dist. LEXIS 11948, [WL] at *3. While the employer's offer was based on the employee's own estimate, "[t]he parties dispute[d] whether Plaintiff [was] provided all the documents in [the employer's] possession regarding the number of hours Plaintiff actually worked." Id. Furthermore, "the Plaintiff's Rule 26 disclosure states that it [*16]  is merely a preliminary estimate due to incomplete records in the possession of the Plaintiff." Id. These factors prevented the court from concluding "that the offer of judgment [was] definitively for more than the Plaintiff could recover at trial. . . ." Id.

b. Similarities Between the Rule 12(b)(1) Analysis Following an Offer of Judgment and a Summary Judgment Inquiry

While ostensibly working within the framework of Rule 12(b)(1), the Reed and Reyes courts' analyses mirror a summary judgment inquiry. The employee in Reed defeated the motion partially by "showing that the materials cited do not establish the absence or presence of a genuine dispute. . . ." Fed. R. Civ. P. 56(c)(1)(B). Among other things, he demonstrated that the employer's declaration left unaddressed the allegation that he was required to work during lunch time. 2004 U.S. Dist. LEXIS 21605, 2004 WL 2415055, at *1. Thus, the Reed court concluded that "it is not unreasonable to infer that [the employee] will be able to show he is entitled to" recover more than the offer. 2004 U.S. Dist. LEXIS 21605, 2004 WL 2415055 at *2 (emphasis added).

Both courts mentioned the importance of additional discovery. Reyes, 2005 U.S. Dist. LEXIS 11948, 2005 WL 4891058, at *2 ("Plaintiff argues that the offer of judgment does not offer complete relief because it is based on the estimates in Plaintiff's initial Rule 26(a) disclosures, [*17]  which are made only based upon the information then reasonably available, prior to the completion of discovery and without access to [the employer's] complete wage and hour records concerning the Plaintiff that would allow for a more accurate estimation of his damages."); Reed, 2004 U.S. Dist. LEXIS 21605, 2004 WL 2415055, at *1 (The employee "has and does dispute that [the employer's] $500 offer would compensate him fully for his claims. It is not for this court to engage in extensive fact determination at this preliminary stage of litigation[, as it would require] a far-reaching and supposition-laced inquiry."). When this situation arises in the context of a summary judgment motion, the court possesses authority to provide additional time for discovery by either denying the motion or deferring its consideration. See Fed. R. Civ. P. 56(d), (e). Noting that until further discovery took place there was no basis "to conclude that the offer of judgment is definitively for more than the Plaintiff could recover at trial," the Reyes court followed this approach by denying the defendant's motion. 2005 U.S. Dist. LEXIS 11948, 2005 WL 4891058 at *3 (emphasis added).

The italicized text in the two preceding paragraphs reveals the hallmark of this comparison: the Reed and Reyes courts applied a burden [*18]  of proof arguably identical to that used under Rule 56. Although composed of different language, the standards used by the two courts are quite similar. If a court cannot "definitely" conclude the moving party's argument is correct, then the nonmoving party's contention is most likely "not unreasonable," and vice versa. Reyes, 2005 U.S. Dist. LEXIS 11948, 2005 WL 4891058 at *3; Reed, 2004 U.S. Dist. LEXIS 21605, 2004 WL 2415055 at *2. Moreover, the moving party's argument is "not unreasonable" if and only if "a reasonable jury could return a verdict for the nonmoving party" -- the latter of these burdens being a common formulation of the summary judgment standard. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). This analysis demonstrates that, in all but name, the Reed and Reyes courts conducted a summary judgment inquiry.

c. The Reed and Reyes Courts Indirectly Apply the Montez Rule

In many cases, a defendant's Rule 68 offer of judgment is nothing more than a "factual attack" on the plaintiff's claims. If the parties still dispute the merits, then in making a Rule 12(b)(1) motion following an offer of judgment, a defendant presents an "indirect attack[ ] on the merits as [a] Rule 12(b)(1) motion[ ]." Montez, 392 F.3d at 150 (quoting Williamson, 645 F.2d at 415). The Reyes and Reed courts recognize the true character of the defendants' attacks. Consequently, they provide the plaintiffs with a "greater level of protection [required [*19]  when] . . . facing a challenge to the validity of [their] claim[s]" by analyzing a Rule 12(b)(1) motion as if it were a Rule 56 motion.8 Id. (quoting Williamson, 645 F.2d at 415). Under the same circumstances in the Fifth Circuit, courts must deny the motion and have parties refile a Rule 56 motion.9 Id. While these two approaches apply different procedures, they produce the same functional result. Absent application of one of these approaches, the general Rule 12(b)(1) standard would require the plaintiff to prove factual disputes, which concern the merits of the claims, by a preponderance of the evidence -- a burden of proof in direct conflict with the Rule 56 standard. Ballew, 668 F.3d at 781 (citation omitted).

8   Courts rely on Rule 56 for clear and effective procedures for analyzing the parties' evidentiary submissions. The Federal Rules of Civil Procedure explicitly require courts to convert motions to dismiss under Rule 12 into summary judgment motions in two instances:

   If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.

Fed. R. Civ. P. 12(d). A "factual attack" creates a circumstance [*20]  paralleling those specifically addressed in Rule 12(d). Therefore, courts draw from Rule 56 in this circumstance as well.

9   Rollins may appear to be an exception to this rule. However, in Rollins, the plaintiff did not dispute the defendant's calculations. Therefore, the offer of judgment conclusively provided full relief, depriving the court of jurisdiction. Rollins, 2006 U.S. Dist. LEXIS 87432, 2006 WL 3486781, at *2-3, *5.

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