Low damages, high fees

The Court of Appeals reminds us that labor law cases that yield low damages can still produce large attorneys' fees awards for the plaintiff's lawyer. Otherwise, no one brings these cases, and the labor law is ignored.

The case is Luo v. L&S Acupuncture, a summary order decided on May 16. I argued the appeal. Plaintiff was denied certain compensation under the Fair Labor Standards Act. After a bench trial, the district court awarded her about $4,000. Her lawyer then moved for attorneys' fees. The trial court awarded plaintiff's trial counsel over $60,000 in fees. On appeal, the employer makes a couple of interesting arguments.

First, the employer says the attorneys' fees award is too high because it served on plaintiff a Rule 68 offer that plaintiff did not exceed at trial, which would reduce the attorneys' fees substantially. The problem was the employer forgot to tell the trial court about the Rule 68 offer when it opposed the attorneys' fees application. Which means the Rule 68 offer essentially did not happen. After the fee decision was issued, defendant remembered the Rule 68 offer and asked the court to reconsider the attorneys' fees motion. The trial court said this motion was filed too late, outside the 28 day deadline. On appeal, the employer said the plaintiff had a duty to apprise the trial court about the Rule 68 offer and her failure to do so was a basis to reduce the award. Interesting argument for which there is no case law. But there was no notice of appeal from the reconsideration denial, which means the Court of Appeals (Pooler, Livingston and Carney) has no jurisdiction over that argument. The Second Circuit will have to decide in some other case the issue of who has to alert the district court about the Rule 68 offer.

But defendant did file a notice of appeal from the initial attorneys' fees ruling, so the Court of Appeals has authority to resolve that issue. That issue was whether the fees were disproportionate to the plaintiff's damages. The Second Circuit says it does not matter. Many of these cases are not big-money cases. But if lawyers do not have incentive to file them, then these violations will go unremedied. Citing Millea v. Metro-North Railroad, 658 F.3d 154 (2d Cir. 2011) (an FMLA case with similarly disproportionate fees-to-damages), the Court says:

“Especially for claims where the financial recovery is likely to be small, calculating attorneys’ fees as a proportion of damages runs directly contrary to the purpose of fee-shifting statutes: assuring that civil rights claims of modest cash value can attract competent counsel.” “The whole purpose of fee-shifting statutes is to generate attorneys’ fees that are disproportionate to the plaintiff’s recovery.” As both the FLSA and the New York Labor Law are fee-shifting statutes, see 29 U.S.C. § 216(b); N.Y. Lab. Law § 198(1-a), we see no reason to depart from the general rule in this case.