Circuit affirms large attorneys' fees award in FLSA case

In this ruling, the Court of Appeals says the plaintiffs' attorneys were able to secure a huge attorneys' fees award for their work on a wage-and-hour claim even though some of their claims failed in the district court. The Court of Appeals also finds that the district court was able to reduce their attorneys' fees award by 40 percent, still resulting in a large fee award for the plaintiffs' lawyers. This case provides a good summary of how attorneys' fees work when the plaintiff achieves a partial victory in the district court.

The case is Holick v. Cellular Sales of New York, issued on September 7. Plaintiffs were owners of companies that sold cellular service plans and devices to the general public through contracts with Cellular, an authorized Verizon Wireless dealer. The arrangement provided plaintiffs with a commission for selling cell service plans, but if the customers cancelled their cell service plan within 6 months, Cellular deducted the sale from its checks to plaintiffs, who claim in turn that the defendants misclassified them as independent contractors when they were actually employees who should not have been subjected to those deductions. While the district court denied plaintiffs' motion for class certification, it said plaintiffs were Cellular employees, granting them about $11,000 for unpaid minimum wages and overtime. This is a partial victory for plaintiffs, as the class certification motion was far more lucrative (they sought $4 million in damages and $700,000 in damages for the name plaintiffs) than the claims upon which they prevailed.

The district court held that the successful and unsuccessful claims were intertwined such that their attorneys' could recover fees expended on all claims, even those that failed. We all know that this can happen if the claims bear a close relationship with each other such that discovery on the bad claims would have been intertwined with the good claims. The district court has discretion to make that determination, and the Court of Appeals will not second guess it. The general rule is that it's not an abuse of discretion if the district court had a variety of options to resolve the motion and was not required to issue one ruling in particular. That rule, deriving from Zervos v. Verizon N.Y., Inc., 252 F.3d 163 (2d Cir. 2001), helps plaintiffs, as the district court said, and the Court of Appeals (Pooler, Wesley and Carney) agrees, stating that "Plaintiffs' claims were all based upon the terms of the contracts between Plaintiffs and Defendants, the circumstances under which the commissions were earned, and the formula by which Plaintiffs were paid. These claims would largely require similar discovery and proof and would be difficult to sever in billing records."

What about the 40 percent reduction? Defendants wanted a greater reduction, but the Court of Appeals says that percentage also falls within the range of permissible decisions by the district court. The Second Circuit does not like to second-guess attorneys' fees rulings like this, as the trial court knows the case better than anyone and these are essentially findings of fact, which are better suited for the trial court than the appellate judges on cold, boring paper record. The Court notes that while the fees in this case amounted to $576,000 and the plaintiffs won a fraction of that amount in damages, FLSA cases often do not yield large damages awards and the law wants good lawyers to take on these cases to ensure that "everyday workers" are adequately paid for their work.