Borup v. The CJS Solutions Group, LLC

Background

Timothy C. Borup alleged that The CJS Solutions Group, LLC, doing business as The HCI Group, misclassified him and other “at the elbow” consultants as independent contractors and therefore failed to provide appropriate overtime pay. He brought an individual claim, a proposed collective action under the Fair Labor Standards Act, and a proposed class action under the Minnesota Fair Labor Standards Act.

On June 12, 2019, HCI served Borup with an offer of judgment under Federal Rule of Civil Procedure 68. The offer proposed judgment in Borup’s favor for $10,000, plus costs, attorney’s fees, and other accrued costs that might be recoverable, as determined by the court. It also required Borup to sign a mutually agreeable settlement and release covering all claims against HCI. Borup moved to strike or otherwise invalidate the offer before the 14-day acceptance period expired. He did not accept it, so the offer was considered unaccepted and withdrawn under Rule 68.

Arguments and legal framework

Borup argued that the offer was premature because the case involved proposed class and collective actions. He contended that the offer created a conflict between his personal interest in accepting the offer and his responsibility to pursue claims for the proposed class and collective. HCI argued that the court should wait to address the offer later, if it needed to address it at all.

The court reviewed differing approaches from other courts. Some courts strike pre-certification Rule 68 offers made to proposed class representatives. Others deny a motion to strike but declare the offer legally ineffective. A third group takes no action before the offer becomes relevant to a later cost determination. The court concluded that none of these approaches was entirely satisfactory, but it also concluded that it had authority to address Borup’s legal challenge and that the issue was sufficiently ready for decision.

Court’s analysis

The court denied Borup’s motion because it rejected the premise that the offer created a uniquely coercive cost-shifting threat. Rule 68 can require an offeree who later obtains a judgment no more favorable than the offer to pay costs incurred after the offer. But the court concluded that Borup would not face meaningfully greater cost exposure merely because he was the proposed representative of a class and collective action.

The court discussed several possible outcomes. If Borup obtained no judgment, the unaccepted offer would be irrelevant. If the proposed Rule 23 class were certified, the court reasoned that the offer made only to Borup would become ineffective as to the class claim because the certified class would have an independent legal status and would become the opposing party for that claim.

The court treated the Fair Labor Standards Act collective action differently because an FLSA collective does not become an independent legal entity through certification. Even so, the court concluded that Borup would not face a unique liability. If Borup and opt-in plaintiffs received one judgment reflecting their combined damages, that judgment would likely be more favorable than the $10,000 offer. If cost shifting applied, the court concluded that it would shift costs, not attorney’s fees, and would likely limit those costs to amounts fairly attributable to Borup’s individual claim. The court also explained that the FLSA treats attorney’s fees and costs as separate items, so the fees would not be shifted under Rule 68 in this case.

If the class and collective actions were not certified but Borup obtained an individual judgment, costs would shift only if that judgment were no more favorable than the offer. The court again stated that any shifted costs would be subject to the same limitations and proportional analysis.

Disposition

The court held that HCI’s Rule 68 offer did not create the conflict of interest or disproportionate cost risk that would justify immediate invalidation. It therefore denied Borup’s “Motion to Strike or Otherwise Invalidate Defendant’s June 12, 2019 Rule 68 Offer of Judgment.” The order addressed the offer’s validity and possible cost consequences, not the merits of Borup’s misclassification and overtime claims. Judge David T. Schultz signed the order as a United States Magistrate Judge.