Total Surrender — For the Win!
Posted on 28-Sep-09 by The Timekeeper
Interesting case I just came across, right here practically in my own back yard in North Carolina. Turns out, sometimes by being willing to give up the fight, you end up winning in the end.
The Back Story
Seems United Mortgage and Loan Investment LLC, a company in the Charlotte area, may have misclassified some of its employees. So-called “Junior Asset Managers,” whose jobs apparently consisted mainly of calling people up and trying to get them to pay their mortgages, were incorrectly classified as “exempt” and not paid overtime.
Apparently the company at one time required employees to fill out timesheets, which the employees say showed they regularly worked over 40 hours per week. Further, the employees alleged in their suit that following a DOL audit in 2006, in which several employees were reportedly interviewed about possible FLSA violations, the company told them to stop filling out the timesheets.
So, eventually, a few employees filed a lawsuit and sought certification as a class-action suit.
Crying “Uncle”
Now, obviously, I don’t know what was said in the discussions between the company and its lawyers, but I’m guessing their lawyers advised them they were in the wrong with how they’d classified these employees, and told them they’d most likely eventually lose if they allowed the case to proceed to trial — but only after they’d incurred several years’ worth of legal fees on their own behalf (not to mention all the time and company resources spent on preparing their defense)… and they’d find themselves on the hook not only for the back pay, damages and their own legal fees, but most likely the equally hefty legal fees of the employees, as well.
As my mamma taught me, sometimes discretion is the better part of valor.
So the company used an obscure little something called an “Offer of Judgment” procedure under Federal Rule of Civil Procedure 68. In English, what they did was offer to settle for back pay, liquidated damages, attorneys’ fees and costs — basically they volunteered to give the employees everything they could possibly have received had the case gone to court and the company lost. Not only that, but they extended the offer to the employees who had filed the suit, and to all the employees who weren’t yet party to the suit but had opted-in to joining the suit should the case be certified for class action.
In a nutshell, the company totally caved on the issue.
FTW!
Again, I can’t know what transpired between the plaintiff employees and their lawyers, but looking at it from the outside, in my humble opinion either the employees were incredibly greedy and/or vindictive or they received spectacularly bad legal advice.
Because — after being offered on the legal equivalent of a silver platter the maximum amount they could possibly have received had they won on every count in court, without even having to go through the trouble of wading through years of class-action litigation — incredibly, the employees turned down the offer of settlement.
What were they thinking?!
What happened next: the judge basically threw out their entire case. Seems that when the employer offered to settle for everything, legally speaking the company rendered their complaint moot… which meant the court no longer had any jurisdiction, as there was no “case or controversy at hand” at that point. I mean, the employees said the employer was in the wrong, then the employer essentially said, “You’re absolutely right — we were in the wrong here,” and offered to make good completely, simply giving the employees everything the court could possibly have awarded them. As far as the courts were concerned, everybody agrees the employer was in the wrong, so there’s no controversy to resolve. Case closed, end of story.
So now, as I understand it, the company is off the hook, at least for the four employees who were party to this case (because the company’s offer of settlement was rejected) and the employees have no more potential class-action case (because the court says it can’t resolve a controversy that was already resolved when the employer made their settlement offer).
As astute students of martial arts and great generals throughout history have always known: sometimes the best way to win a battle is to avoid the fight entirely. 
H/T to the New Jersey Employment Law Blog for bringing this to my attention, and to Wage & Hour — Development & Highlights for an excellent analysis of the case!
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