333 F.R.D. 142 (D.Minn. 2019), 18-cv-1647 (PAM/DTS), Borup v. CJS Solutions Group, LLC

Docket Nº:18-cv-1647 (PAM/DTS)
Citation:333 F.R.D. 142, 104 Fed.R.Serv.3d 1402
Opinion Judge:DAVID T. SCHULTZ, United States Magistrate Judge
Party Name:Timothy C. BORUP, Individually and on behalf of all others similarly situated, Plaintiff, v. The CJS SOLUTIONS GROUP, LLC, d/b/a/ The HCI Group, Defendants.
Attorney:Kelly A. Lelo, T. Joseph Snodgrass, Larson King, LLP, St. Paul, MN, Thomas A. Jacobson, Swenson Lervick Syverson Anderson Trosvig Jacobson, PA, Alexandria, MN, for Plaintiff. Claire B. Deason, Corey Christensen, Jacqueline E. Kalk, Littler Mendelson, PC, Joseph G. Schmitt, Nilan Johnson Lewis PA,...
Case Date:October 08, 2019
Court:United States District Courts, 8th Circuit, District of Minnesota

Page 142

333 F.R.D. 142 (D.Minn. 2019)

104 Fed.R.Serv.3d 1402

Timothy C. BORUP, Individually and on behalf of all others similarly situated, Plaintiff,

v.

The CJS SOLUTIONS GROUP, LLC, d/b/a/ The HCI Group, Defendants.

No. 18-cv-1647 (PAM/DTS)

United States District Court, D. Minnesota

October 8, 2019

Page 143

Kelly A. Lelo, T. Joseph Snodgrass, Larson King, LLP, St. Paul, MN, Thomas A. Jacobson, Swenson Lervick Syverson Anderson Trosvig Jacobson, PA, Alexandria, MN, for Plaintiff.

Claire B. Deason, Corey Christensen, Jacqueline E. Kalk, Littler Mendelson, PC, Joseph G. Schmitt, Nilan Johnson Lewis PA, Minneapolis, MN, Gena Brooke Usenheimer, Seyfarth Shaw LLP Labor & Employment, New York, NY, for Defendants.

ORDER

DAVID T. SCHULTZ, United States Magistrate Judge

INTRODUCTION

Plaintiff Timothy C. Borup moves to strike or otherwise invalidate the purported Rule 68 Offer of Judgment Defendant CJS Solutions Group, LLC ("HCI") made on June 12, 2019. Relying upon authority from this District and from other circuits and districts, Borup argues that— whatever the mechanism used— the Court must invalidate HCI’s offer of judgment as premature in the context of a putative class and collective action. Offering competing authority, HCI contends the Court must wait to decide the issue later, if it has to decide it at all.

Although a Rule 68 offer of judgment offered solely to the named plaintiff in a putative class and collective action does not neatly square with the rules governing those types of actions, there is no reason to declare HCI’s offer ineffective as the concern Borup raises does not exist and so will not come to roost.

RELEVANT BACKGROUND

Borup alleges that HCI misclassified him and other "at the elbow" consultants as independent contractors and accordingly failed to provide appropriate overtime pay. He asserts two causes of action: (1) a violation of the federal Fair Labor Standards Act, filed on behalf of himself and a putative FLSA collective, and (2) a violation of the Minnesota Fair Labor Standards Act, filed on behalf of himself and a putative Minnesota class. The case has proceeded at something short of breakneck speed. Stays, the result of both stipulation and the revelation of an undisclosed, related case in the Southern District of New York, as well as discovery issues, have stalled the normal case progression.

On June 12, 2019, HCI served Borup with a Rule 68 Offer of Judgment on his individual claim. The pertinent terms of the Offer provide: That Judgment be entered in Plaintiff’s favor in the above-captioned case for a total sum of ten thousand and twenty five dollars and zero cents ($10,000) [sic], as well as any amount for costs of suit, attorneys’ fees, and any and all other accrued costs that might be recoverable against Defendant in this action, to be determined by the Court. This Offer includes all valid claims for damages that Plaintiff has alleged against Defendant, as well as compensation for costs and reasonable attorneys’ fees accrued up to the date of this Offer (to the extent that (a) reasonable attorneys’ fees are included in "costs" recoverable for certain of Plaintiff’s causes of action; and (b) Plaintiff has incurred any attorneys’ fees).

Decl. of T. Joseph Snodgrass, June 21, 2019, Ex. F, at 1. The Offer further requires that "as a condition of this Offer, Plaintiff agrees to execute a mutually agreeable Settlement Agreement and Release for the purpose of releasing any and all claims against Defendant." Id. at 1-2.

Page 144

Before the fourteen day period to accept HCI’s Offer of Judgment elapsed, Borup filed the present motion to strike or otherwise invalidate the Offer.1 That period elapsed, however, before the hearing on the motion took place. Because Borup did not accept the Offer within the fourteen days, it is considered unaccepted and withdrawn. Fed.R.Civ.P. 68(a)-(b).

ANALYSIS

At least 14 days before trial, a defendant may offer to allow judgment to be entered against it for a specific amount, including the costs then accrued. Fed.R.Civ.P. 68(a). If the offeree declines, and subsequently obtains a judgment "not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made." Id. at 68(c). The "plain purpose of Rule 68 is to encourage settlement and avoid litigation .... The Rule prompts both parties to a suit to evaluate the risk and costs of litigation, and to balance them against the likelihood of success upon trial on the merits." Marek v. Chesny, 473 U.S. 1, 5, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985).

Borup makes several arguments as to why HCI’s purported Rule 68 Offer of Judgment should be stricken or invalidated. But his argument that the Court should do so now, rather than during a hearing to determine costs, as would be the normal course, rests on a single key premise. If the Court fails to act now, Borup’s theory goes, the Offer will create an intractable conflict between his personal interests and his obligations as a representative of the putative class. This is so because the Offer, exclusive of costs and attorney’s fees, is greater than any personal award he could hope to obtain at a trial on the merits. He now faces significant pressure to settle, lest he bear the burden of all costs incurred subsequent to the Offer, which may outstrip any award in his favor. HCI disagrees and argues that the matter is not ripe for decision and that the Court lacks the power to grant the relief Borup desires.

The Court will not grant Borup’s motion. This is so not because the Court lacks the power to do so or because the matter is unripe. Rather, the sword of Damocles dangling over Borup’s head does not present the disproportionately coercive threat he claims— or that HCI likely hoped it would.

I. The Divided Authority

The issue presented by the parties is not new. Almost every federal court to consider a Rule 68 offer of judgment to only the putative representative in the context of a class or collective action has concluded that, although Rule 68 may not directly conflict with either Rule 23 or the FLSA, they cannot be said to exist harmoniously. At the very least, Rule 68 offers seemingly undermine the purpose of class and (to a lesser extent) FLSA collective actions and the unique oversight role that courts have in such cases. Despite this consensus, courts have addressed motions like Borup’s very differently. These courts and their approaches may be categorized into three "camps." Gilmore v. USCB Corp., 323 F.R.D. 433, 434 (M.D. Ga. 2017); Jack Starcher, Note, Addressing What Isn’t There: How District Courts Manage the Threat of Rule 68’s Cost-Shifting Provision in the Context of Class Actions, 114 Colum. L.Rev. 129, 131 (2014).

The first camp grants the motion to strike a Rule 68 offer of judgment served upon a putative class representative before certification. This is the approach most frequently followed in this District. See, e.g., Johnson v. U.S. Bank Nat’l Ass’n, 276 F.R.D. 330 (D. Minn. 2011); Portz v. St. Cloud State Univ., 196 F.Supp.3d 963 (2017), R & R adopted by 2017 WL 3588757 (D. Minn. Aug. 20, 2017);

Page 145

Lamberson v. Fin. Crimes Serv., LLC, Civ. No. 11-98 (RHK/JJG), 2011 WL 1990450 (D. Minn. Apr. 13, 2011).2 As Magistrate Judge Keyes emphasized in Johnson, "[t]he purposes of Rules 68 and 23 are ill-served" by requiring a putative class plaintiff to evaluate the merits of a class certification motion, rather than the merits of the class claim itself. 276 F.R.D. at 335. Rule 23 requires the court to act to prevent a circumvention of the class action mechanism. Id. at 336. These courts conclude that the appropriate remedy to the immediate harm plaintiffs face is to strike the Rule 68 offer, e.g., id., and any qualms regarding the mechanism used "is the sort of technicality that elevates form over substance." Lamberson, 2011 WL 1990450, at *4.

A second, smaller group of district courts follows the policy reasoning of the first camp up until the question of the appropriate remedy. These courts note that, because the "offer of judgment is not filed with the court until accepted or until offered by a deferred party to prove costs," there is nothing in the record to strike. McDowall v. Cogan, 216 F.R.D. 46, 51 (E.D.N.Y. 2003). This is not a problem, however, because their preceding analysis demonstrated that a pre-certification offer of judgment has no legal significance whatsoever. Id. These courts thus deny the motion to strike itself, but offer relief by declaring a pre-certification offer a legal nullity.

The final cohort— and the approach urged by HCI— emphasizes a plain reading of Rule 68 and provides the moving plaintiff with no relief or guidance. Nothing in the Rule itself prevents a defendant from serving an offer of judgment on an opposing party simply because the case is a putative class or collective action. 12 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3001.1 (3d ed.). Without a per se bar on Rule 68 offers in class actions, these courts deem any pre-judgment motion regarding the offer to be purely advisory and so offer no guidance to the concerned plaintiff. E.g., Combe v. Goodman Frost, PLLC, 217 F.Supp.3d 986, 988-90 (E.D. Mich. 2016).

  1. Shortcomings of the Existing Authority

Both Borup and HCI urge the adoption of one of these three camps. Borup would have the Court adopt either of the first two approaches, as the relief under each would be satisfactory. HCI would rather its Offer remain effective. Analytically, however, none of the three approaches is wholly satisfying.

By its terms, Rule 68 does not create an exception for class or mass actions.3 So, to the extent that an issue exists to be resolved,...

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