The Second Circuit concluded that the FLSA does not contain “‘the necessary clear expression of congressional intent’ required ‘to exempt the statute from the operation of’ Rule 68.”
Judicial approval is not required of Rule 68(a) offers of judgment settling FLSA claims, ruled a divided Second Circuit in a 2-1 decision. In light of the unambiguously mandatory command of Rule 68(a) for the clerk of the court to enter offers of judgment when they are accepted, and because the appeals court found no indication by Congress or the Supreme Court that the FLSA requires judicial approval of stipulated judgments concerning FLSA claims in the context of ongoing litigation, the appeals court declined to find such a requirement. Thus, the judgment of the district court was reversed and remanded with instructions that the clerk of the court enter judgment as stipulated in the parties’ accepted Rule 68(a) offer. Judge Calabresi filed a separate dissenting opinion (Yu v. Hasaki Restaurant, Inc., December 6, 2019, Walker, J., Jr.).
Offer of judgment accepted. A sushi chef filed a collective action against a restaurant and various individual owners and managers, alleging violations of the FLSA and New York labor laws. The employer made a Rule 68(a) offer of judgment for $20,000 plus reasonable attorneys’ fees, costs, and expenses through the date of the offer. The employee timely accepted and filed a letter notifying the district court of his acceptance.
Court wants to review. The district court ordered the parties to submit their settlement agreement along with a joint letter explaining why the settlement should be approved as fair and reasonable. The court cited the Second Circuit’s decision in Cheeks v. Freeport Pancake House, Inc., which held that stipulated dismissals settling FLSA claims with prejudice pursuant to Rule 41(a)(1)(A)(ii) require approval of either the district court or the Department of Labor, in explaining that it had to scrutinize the settlement to ensure it was fair and reasonable. The parties submitted a joint letter arguing that they did not need judicial approval, but the court issued an opinion finding that judicial approval of the settlement agreement was required. However, it certified its order for interlocutory appeal.
DOL amicus brief. Meanwhile, the Secretary of Labor had filed an amicus brief in a separate case, Sanchez v. Burgers & Cupcakes LLC, arguing that judicial approval was required when a Rule 68(a) offer of judgment is accepted by a plaintiff raising FLSA claims.
Second Circuit takes the case. An appellate panel granted the parties’ motion to file a late Section 1292(b) petition. The question currently before the Second Circuit is whether acceptance of a Rule 68(a) offer of judgment that disposes of an FLSA claim needs to be reviewed by a district court or the DOL for fairness before the clerk of the court can enter the judgment.
Must enter judgment. Rule 68(a) states that at least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer of judgment on specified terms, with the costs then accrued. The opposing party then has 14 days to provide written notice accepting the offer, and the clerk must then enter judgment. On its face, Rule 68(a)’s command that the clerk must enter judgment is mandatory and absolute.
Exceptions? Despite this mandatory language, the amici and the district court contended that there are “rare situations” in which a court must approve the proposed resolution of the pending litigation before the stipulated judgment can take legal effect. However, the Second Circuit has yet to endorse any of the exceptions they cited. Assuming, though, that Rule 68(a) offers of judgment are susceptible to judicial review in certain situations, the appeals court agreed with the district court that the proper inquiry is “whether FLSA claims fall within the narrow class of claims that cannot be settled under Rule 68 without approval by the court (or the DOL).”
Here, the appeals court concluded that the FLSA does not contain “‘the necessary clear expression of congressional intent’ required ‘to exempt the statute from the operation of’ Rule 68.” It was unwilling to make the leap that Rule 68(a) offers of judgment settling FLSA claims must be approved by a judge before the clerk may enter the judgment absent any indication from Congress or the Supreme Court that the FLSA requires such approval—especially when there is not a scintilla of support in the language of the Act—in the face of Rule 68(a)’s explicit textual command that the clerk of the court “must” enter stipulated judgments.
Cheeks decision limited. While the Second Circuit acknowledged the similarities to the instant case and Cheeks, it declined to extend Cheeks’ holding to the context of Rule 68(a) offers of judgment, concluding that it was limited to stipulated dismissals settling FLSA claims with prejudice under Rule 41(a)(1)(A)(ii). Cheeks did not address other avenues for dismissal or settlement of claims, including Rule 68(a) offers of judgment. The appeals court did not believe that all of the reasons supporting the decision in Cheeks comfortably apply in the Rule 68(a) context.
Remedial goals of statute. Finally, appeals to the broad remedial goals and uniquely protective qualities of the FLSA did not convince the court that it was authorized to write a judicial approval requirement into the statute, and thereby into Rule 68(a), when the text of both provisions are silent as to such a requirement.
Dissent. Judge Calabresi argued that the majority misread the language, history, and design of the FLSA. He observed that subsection 216(c) says that private settlement agreements resolving wage-hour liability constitute waivers of FLSA plaintiffs’ claims when they are supervised by the Secretary of Labor. This subsection is rendered superfluous by the majority’s interpretation, he argued.
According to the dissent, Rule 68(a) conflicts with the federal statute. Nothing in Rule 68(a) limits private parties from making precisely the kind of general private settlements that the Supreme Court, all the circuits that have addressed the issue, and the Department of Labor have said the FLSA prohibits.
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