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A Rejected Offer of Judgment Does Not Prevent a Class Action for Unpaid Overtime

In April 2009, Gareth Pitts filed a class action complaint against his employer, Terrible Herbst, Inc., for failing to pay Pitts and other employees’ overtime and minimum wages. Pitts alleged that Terrible Herbst had violated the Fair Labor Standards Act (FLSA) and Nevada Labor Laws, and committed a breach of contract.

Before Pitts filed a motion for class certification, Terrible Herbst made a Rule 68 offer of judgment for $900, even though Pitts only claimed $88 in damages. Pitts then sought to abandon his FLSA claims and pursue only his Rule 23 class action available under the Federal Rules of Civil Procedure. Before Pitts could amend his claim but after Pitts rejected the offer of judgment, Terrible Herbst filed a motion to dismiss claiming its offer of judgment rendered the entire case moot. Though the court disagreed that an offer of judgment rendered the entire case moot, Pitts’ case was dismissed with prejudice because Pitts failed to timely file the class certification for just a Rule 23 class action. Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1085 (9th Cir. 2011)

On Pitts’ appeal, the Ninth Circuit reversed, holding that an unaccepted offer of judgment does not moot a case because allowing a defendant to “buy off” a class action by making an offer of judgment to satisfy a plaintiff’s claim would make a matter transitory such that it would evade review. The Ninth Court further held that by giving a written response to a motion to dismiss, Pitts communicated to the district court, his desire to abandon his FLSA claims. Amendment of his complaint was not necessary. Further, Pitts’ dismissal of his federal claims does not divest the district court of its power to exercise supplemental jurisdiction unless the claims were devoid of merit or frivolous, which is not the case here. If the district court were to certify a class, certification would relate back to the filing of the complaint.

The Ninth Circuit remanded Pitts’ state law claims back to state court, and denied Terrible Herbst’s motion to dismiss the breach of contract claim. Pitts v Terrible Herbst, Inc., No. 2:09-CV-940-RCJ-RJJ (D. Nevada, December 7, 2011)

The commentary is for educational and commentary purposes only. If you or someone you know are a service industry employer or employee with an FLSA or other employment matter, and would like to be represented by a Nevada attorney, contact our office for a free confidential case review and receive a response within hours. Call Toll Free 866-414-0400.