A federal appeals court has underscored its insistence that attorneys’ fee awards take into account just how far short of the target a plaintiff’s arrow falls.
Judges must compare the amount of damages sought to the amount awarded, the 4th U.S. Circuit Court of Appeals emphasized in a federal Fair Labor Standards Act class action this month.
The FLSA case was marked by a pronounced deflation of value. At the outset lawyers for employees of PowerComm, a Virginia-based utility construction company, alleged nearly $1.75 million in damages for shortchanging them on overtime pay. Later the figure dropped below $790,000. The case finally settled for just $100,000.
That result “can hardly be deemed a success,” the three-judge appellate panel said. “We do plaintiffs no service by rewarding their counsel for pursuing weak claims from the outset,” the court wrote in a July 11 per curiam opinion.
The case required two trips to the 4th Circuit. On its second review of the fee issue, the 4th Circuit judges found the trial judge had not reduced fees enough, directing him to cut the award by 25 percent.
The decision “will be a guidepost for other cases down the road,” said PowerComm’s attorney, Geoffrey M. Bohn of Arlington, Virginia. He added that its analysis will apply in any case involving an attorneys’ fee provision.
The 18-page unpublished opinion is Randolph v. PowerComm Construction Inc.
The plaintiffs, employees of PowerComm’s Maryland operations, filed a proposed class action in Maryland federal court in 2013, claiming the company failed to pay enough for overtime work.
The suit sought $1,745,875.65 in damages, including both unpaid wages and liquidated damages under the Maryland and federal wage statutes. In March 2014, U.S. District Judge George Jarrod Hazel conditionally certified the case as a class action under the FLSA, and 64 employees signed up.
By September, the damages claim had dropped to $789,916.23. Hazel dismissed 10 of the plaintiffs in 2015, ruling their claims were barred by the statute of limitations, but certified the class for 54 plaintiffs. The parties settled for $100,000 in 2016, without any agreement as to fees and costs.
The plaintiffs’ lawyers first sought $227,577 in fees, more than double what their clients received in the settlement. Hazel awarded $183,764 in 2016, but the 4th Circuit instructed him to reconsider his findings, including his conclusion that the relief obtained represented 38 percent of the amount sought for timely claims. The figure was only 13 percent, the appellate judges said.
In June 2018, Hazel awarded $177,756.50 in fees, a cut of about $6,000, and PowerComm appealed again.
“He didn’t knock it down as much as we thought he should have,” Bohn said.
Taking a second look at the fee issue, the 4th Circuit panel concluded Hazel abused his discretion in evaluating the degree of the plaintiffs’ success.
Nicholas Woodfield of The Employment Law Group in Washington, D.C. represented the plaintiffs. He argued that dismissal of some of the untimely plaintiffs should not be regarded as a lack of success, since the employer initially had identified those plaintiffs as having timely claims.
“We shouldn’t have been taxed for the people the defendant gave us,” Woodfield said at oral argument May 8.
The court did not address that argument in its opinion, but spoke in broader terms about evaluating the success of an action. The court described a three-step process for calculating an attorneys’ fee award: (1) Determine a lodestar figure, (2) subtract fees for time spent on unsuccessful claims and (3) evaluate the degree of success.
The panel had no quarrel with the lodestar calculation of $183,764. Nor did the panel find abuse of discretion in the $6,000 reduction based on the 10 unsuccessful plaintiffs. But at step three, “the district court wholly failed to account for both the utterly unsuccessful plaintiffs and the meager victories,” the judges wrote.
It can be challenging to put a number on success, the panel acknowledged. But prior 4th Circuit decisions require comparing the amount of damages sought to the amount awarded, the judges stressed.
Hazel erroneously failed to consider the ten dismissed plaintiffs and the limited overall success of the action at the third step of the calculus.
“Here, Appellees were categorically unsuccessful in their recovery,” the court said. They failed to obtain liquidated damages or a declaration that the employer had violated either the FLSA or the comparable Maryland statute, the judges observed.
Most of the plaintiffs received only 38 percent of their claimed unpaid overtime, the court said.
While Hazel had expressed concern about discouraging plaintiffs’ counsel from reaching reasonable settlements, the 4th Circuit said the “flip side” of that analysis was also a concern.
“That is, plaintiffs’ counsel should not be incentivized to solicit clients with promises of riches when they do not have sufficient proof to support the claims,” the panel wrote.
Fee award directed
Noting the case was before the appeals court for the second time for fee calculation, the judges decided to dictate a number to the trial court to avoid further expense and use of judicial resources.
“We conclude a reduction of 25% of the district court’s award ($177,756.50) is appropriate in this case and direct that an attorney’s fees award of $133,317.38, exclusive of costs, be awarded,” the panel wrote.
Bohn said the court’s analysis is applicable, not just to the FLSA, but to any case based on a federal statute with a fee-shifting provision.
“It’s broader that just the FLSA,” Bohn said.
Woodfield was not available for comment on the court’s ruling.