I have defended numerous FLSA class actions and a big reason that these cases settle is due to the fee-shifting nature of the statutes involved.  A defendant employer not only has to pay his lawyer’s fees but it also faces the disturbing possibility of paying (hundreds of) thousands of dollars for the plaintiff’s lawyers.  What happens if claims that are brought are defeated or withdrawn?  Should the lawyers be able to claim fees for those losing efforts?  A federal appellate court seems to answer that in the affirmative.  The case is entitled Holick v. Cellular Sales of New York, LLC, and issued from the Second Circuit Court of Appeals.

In Holick, the plaintiffs filed a class action, alleging they were not paid properly.  They alleged improper deductions from their wages, not being paid for working time, not being paid on time for earned commissions, the tort of unjust enrichment and not paying overtime.  They also claimed they were improperly classified as independent contractors instead of employees. The employer successfully defended the motion for class and collective certification, leaving only the two named plaintiffs  Following a bench trial, the plaintiffs were successful on only two of their claims and received a total of $11,121.

The plaintiffs’ lawyers wanted their attorney fees because they were slightly successful in the litigation.  The lower court determined that the unsuccessful claims were related to the successful ones and required similar proofs.  Thus, the trial court refuse to reduce the petition for fees on that basis; the fees amounted to $961,000.  Put differently, the court would not back out fees that were connected to the unsuccessful Counts, i.e. the illegal wage deductions, unpaid working time and untimely payment of commissions.  However, the court did reduce the award to approximately $576,000 because some of the legal hours were spent on an unjust enrichment claim which was voluntarily withdrawn and other tangential matters (unemployment insurance claim).

The Second Circuit agreed with the premise that there was commonality between the successful and unsuccessful claims.  Thus, the fees asked for were intertwined with the fees on the other claims and the facts undergirding the claims were common to all Counts.  Thus, the appellate court agreed that all of the fees sought for litigating the unsuccessful claims did not warrant a wholesale reduction or elimination.   The Court held there was no clear line of demarcation as to when to award attorney fees or when to reduce them even when plaintiffs do not secure class certification.  The Court ruled it was within the trial court’s discretion not to make further reductions in the fees petitioned for.   

The Takeaway

What an awful decision!  Even when their clients lose, the attorneys win.  In sum, even where the employer defeats class certification, if other claims survive that are directly or, evidently, even tangentially, related to those claims, the attorney fee award survives, almost totally intact.  I imagine the surviving claims must be sufficiently, whatever that means, related to the dismissed ones to warrant the fees but I fear courts will interpret the word “sufficiently” fairly broadly.

Like Gordon Lightfoot sang in “Sundown,” “sometimes I think it’s a sin when I feel like I’m winnin’ when I’m losin’ again.”